These are stocks that tend to be strongly affected by the business cycle.

So when consumers are feeling confidant they use a lot more of this type of firm’s goods or services which pushes up profits and the share price. However in bad times the same consumers will rein in spending quickly which in turn hits profits and dents the share price. Examples of cyclical firms therefore include banks (lending is often based heavily on confidence) and house builders (who only tend to build when forward orders look strong).