Cyclical Stock

A stock whose price and earnings are heavily influenced by the broader economic cycle, rising during expansions and falling during recessions. Industries like automotive, housing, airlines, and luxury goods are classic cyclical sectors. Savvy investors buy cyclicals when their P/E ratios look highest (earnings are depressed) and sell when P/E ratios look lowest (peak earnings), which is counterintuitive and exactly why most people get the timing wrong.