The cyclical industry refers to those sectors of the economy that are significantly affected by the overall business cycle and macroeconomic conditions. These industries, which can include sectors like automotive, construction, and travel, tend to flourish during periods of economic prosperity when consumer confidence and disposable income are high. However, they may also experience significant downturns during recessions or periods of economic uncertainty, as consumers and businesses cut back on spending in these areas.
Cyclical stocks are the shares of companies within these cyclical industries. Their share price often mirrors the ebbs and flows of the business cycle, rising during periods of economic expansion and falling during downturns. Cyclical stocks can provide investors with substantial returns during boom periods, but they can also suffer significant losses during a recession or a bear market. These companies’ earnings and share prices are, to a significant extent, shaped by the macroeconomic environment, making them more volatile than stocks in non-cyclical or defensive industries.
Investing in cyclical stocks can be a strategic part of a diversified investment portfolio. Investors may choose to invest in cyclical stocks during economic upturns to capitalize on potential high returns. However, investing in these stocks requires a keen understanding of the business cycle and the ability to predict economic trends. During periods of economic decline, these stocks can be risky investments. Nonetheless, savvy investors may also see downturns as opportunities to buy cyclical stocks at lower prices in anticipation of a future economic recovery. With that said, let’s dive into two cyclical stocks to watch in the stock market right now.
Cyclical Stocks To Buy [Or Avoid] Right Now
Caterpillar (CAT Stock)
Leading off, Caterpillar Inc. (CAT) is a multinational corporation focusing on the production of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The company’s performance and revenue often ebb and flow with the state of the global economy and infrastructure development.
This week Caterpillar announced that they will disclose their financial results for the second quarter of 2023. The data will be released on Tuesday, August 1st, and will be made public early in the day at 5:30 a.m. Central Daylight Time. This financial update will provide insights into the company’s performance during the past quarter.
Year-to-date, shares of CAT stock are up 9.00% so far. Meanwhile, during Wednesday’s lunchtime trading session, Caterpillar stock is trading at $260.37 a share.
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Boeing (BA Stock)
Second, Boeing Co. (BA) is one of the largest aerospace entities in the world. It is known as a leading manufacturer of commercial jetliners and military aircraft. The health of the aerospace industry is often dictated by varying economic conditions, fuel prices, and geopolitical events.
Earlier this month, Boeing announced plans to disclose its financial results for the second quarter of 2023 on Wednesday, July 26th. The aerospace company’s President and CEO, David Calhoun, along with Executive VP and CFO, Brian West, will not only share these results but will also provide a discussion about the company’s outlook moving forward.
In 2023 thus far, shares of Boeing stock have gained by 6.68% year-to-date. While during Wednesday’s early afternoon trading session, BA stock is trading at $208.44 a share.