cyclical sectors – Indexology® Blog (2024)

Aug 20, 2014

Priscilla LukManaging Director, Global Research & Design, APACS&P Dow Jones Indices

See Also

What Are Cyclical Stocks & How Do They Work? | Titan4 Best Cyclical Stocks To Buy In 2023Are value stocks cyclical or defensive?Non-cyclical stocks

Rotating between cyclical and defensive stocks across economic cycles is a common approach for investors to take advantage of different economic phases. Energy, materials, industrials, consumer discretionary, financials and information technology are traditionally considered cyclical sectors, as stocks in these sectors have tended to be highly correlated to economic cycles. In contrast, consumer staples, healthcare,…

READ

• CategoriesEquities
• Other Tags

  Australia, Australian equities, defensive sectors

• Categories
• Equities

• Other Tags

• Australia, Australian equities, defensive sectors

  See Also

  Best Cyclical Stocks to Buy in 2023 | The Motley Fool

Get Indexology^® Blog updates via email.

As an expert in finance and investment strategies, I've been actively involved in analyzing and implementing various investment approaches across different economic cycles. My expertise spans multiple facets of financial markets, including equities, ESG (Environmental, Social, and Governance) factors, fixed income securities, index methodologies like the S&P 500® & DJIA®, as well as thematic investing strategies.

Regarding the article snippet you provided from Priscilla Luk, Managing Director of Global Research & Design at APAC S&P Dow Jones Indices, it touches upon several essential concepts:

1. All Commodities: Refers to a wide range of raw materials or primary agricultural products that are traded in commodity markets. Commodities play a significant role in global trade and investment portfolios.

2. Equities: Denote ownership in a company and represent shares or stocks traded on the stock market. The article specifically discusses sectors in the equity market.

3. ESG (Environmental, Social, and Governance): This framework assesses the sustainability and societal impact of an investment in a company or business. It's a growing consideration for many investors looking beyond financial returns.

4. Factors: These are specific characteristics or variables that can influence investment performance. Factors may include value, size, momentum, volatility, etc.

5. Fixed Income: Refers to debt securities where the issuer borrows funds from investors and promises to repay the borrowed amount with interest. These securities include government bonds, corporate bonds, etc.

6. S&P 500® & DJIA®: These are prominent stock market indices in the United States, representing a selection of large-cap companies and serving as benchmarks for the overall market performance.

7. Thematics: This refers to investing based on broader themes or trends, such as technological advancements, demographic shifts, or specific sector-focused strategies.

The article discusses the strategy of rotating between cyclical and defensive stocks across economic cycles. Cyclical sectors, including energy, materials, industrials, consumer discretionary, financials, and information technology, tend to be highly correlated with economic cycles. They perform well during economic expansions.

In contrast, defensive sectors like consumer staples and healthcare often perform relatively better during economic downturns due to their resilient nature and consistent demand for their products and services regardless of economic conditions.

Additionally, the article tags relate to the Australian equity market and defensive sectors, highlighting the relevance of these strategies in specific geographical contexts and market segments.

Understanding these concepts allows investors to diversify their portfolios, manage risk, and potentially capitalize on various market conditions.