Cyclical sectors are highly sensitive to cycles of an economy through expansion, peak, recession, and recovery. Cyclical stocks typically belong to industries dependent on consumer & business spending like travel, entertainment, and luxury retail or industries affected by interest rates such as banks and real estate.
The materials sector encompasses companies that are involved in the extraction, processing, and distribution of raw materials such as metals, chemicals, and forest products. These companies are affected by fluctuations in commodity prices, supply and demand, and global economic conditions.
The consumer discretionary sector includes companies that produce goods and services that are considered non-essential, such as apparel, automobiles, and leisure activities. These companies are often influenced by consumer sentiment, economic conditions, and competition.
The financial sector comprises companies that provide financial services such as banking, insurance, investment management, and real estate services. These companies are affected by interest rates, regulatory changes, and economic conditions.
The real estate sector includes companies involved in the development, acquisition, and management of real estate properties, including residential, commercial, and industrial properties. These companies are affected by changes in interest rates, demographics, and economic conditions, as well as local real estate market trends.
Defensive sectors provide consistent returns, regardless of conditions in the broader stock market or the economy. Defensive stocks typically belong to well-established companies that offer goods and services people always need, such as utilities, healthcare, and consumer staples.
The utilities sector includes companies involved in the production and distribution of essential services such as electricity, gas, and water. These companies typically operate in regulated environments and are affected by changes in energy prices, government regulations, and weather patterns.
The healthcare sector comprises companies involved in the manufacturing, distribution, and delivery of healthcare-related products and services, such as pharmaceuticals, medical devices, and healthcare facilities. These companies are affected by factors such as government policies, healthcare demand and demographics, and technological advancements.
The consumer staples sector includes companies involved in the production and distribution of essential products such as food, beverages, and household goods. These companies are less affected by economic cycles and consumer sentiment compared to other sectors.
Sensitive sectors have moderate correlations with the cycles of an economy through expansion, peak, recession, and recovery. Unlike cyclical stocks, they are more resistant to fluctuations in spending and interest rates, but still feel cumulative effects such as communication services, energy, industrials, and technology.
The communication services sector encompasses companies involved in the telecommunications, media, and entertainment industries. These companies are affected by changes in technology, consumer behaviour, and regulatory environment.
The energy sector includes companies involved in the exploration, production, and distribution of oil, gas, and renewable energy sources. These companies are affected by energy prices, government policies, and geopolitical events.
The industrials sector comprises companies involved in the manufacturing, distribution, and provision of industrial products and services, such as machinery, transportation equipment, and construction materials. These companies are affected by economic cycles, global trade, and technological advancements.
The technology sector includes companies involved in the production and distribution of technology-related products and services, such as software, hardware, and IT services. These companies are affected by technological advancements, consumer demand, and global economic trends.