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What Are Cyclical and Defensive Stocks?
If youre an investor, you may be familiar with the investment strategy tied to cyclical and defensive stocks.
A simple definition of a cyclical stock is one thats tied closely to the macroeconomic conditions.
Defensive, or non-cyclical stocks, remain generally unaffected by economic ups and downs.
On the other hand,carmakers, banks and tech stockswere generally cyclicals.
Their performances were more closely tied to the economy.
For investors, non-cyclical stocks have acted like a risk management tool for investment portfolios.
Uncertain Patterns
Financial experts have said this investing pattern may no longer work for some people.
One big reason is economic uncertainty has increased the challenge of predicting howcyclical and defensive stockswill perform.
Lets look at some recent examples.
But the challenge is that it only happened to some extent.
Complicated Solutions
The answer to how to adjust your investment strategy is a personal one.
Your financial advisor may be able to providesome specific recommendations, particularly based on your own portfolio.
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