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Cyclical Stock

A cyclical stock is one that tends to follow along with economic cycles. As the economy turns up, these stocks will generally rise along with it. Examples of these include housing, paper and automobiles. These stocks tend to be interest rate sensitive and as the economy contracts or turns down, these stocks will generally descend as well. A cyclical company is one whose earnings fluctuate with changes in a particular business or industry cycle. When the economic conditions are favorable, the company's stock and earnings rise. As the cycle ends, the company's revenues and stock value falls back to its previous position.