cyclical assets and non-cyclical assets
"Cyclical assets" and "non-cyclical assets" are two financial terms used to describe different types of assets based on their performance during economic cycles.
1.Cyclical assets: These assets experience significant fluctuations in value during economic cycles and are closely tied to the prosperity and downturns of the economy. Typically, these assets perform well during periods of economic growth but may face challenges during economic recessions.
Some common examples of cyclical assets include:
-Automobiles and other durable consumer goods: People are more inclined to purchase large durable consumer goods during economic expansions.
-Real estate and construction industry: Real estate markets and the construction industry are often closely linked to economic growth.
-Metals and mineral resources: Demand for metals and mineral resources increases with infrastructure development and manufacturing needs in the economy.
2.Non-cyclical assets: These assets exhibit relatively stable value and are not significantly impacted by economic cycles or have less correlation with them. These assets generally provide stable income and value growth regardless of the economic conditions.
Some common examples of non-cyclical assets include:
-Food and beverages: People require food and beverages irrespective of the economic conditions.
-Basic necessities: Items like toiletries, daily household products, etc., have relatively stable demand.
-Healthcare: Healthcare services are needed regardless of the state of the economy.
It is important to note that certain assets may exhibit both cyclical and non-cyclical characteristics depending on the industry they belong to, market conditions, and other factors. Additionally, market conditions and the individual company’s performance can also cause asset performance to deviate from their general classification. Therefore, thorough research and analysis are required for specific assets to accurately assess their cyclical attributes.
03 Jul 2023 - by toptradeready.com