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Definition

A cyclical share is one which is heavily impacted by the business cycle. When the economy is going through a slow growth period (a recession) then consumers tend to put off buying big-ticket items and luxuries. This means that sales of new motor vehicles will decline in a recession, as will the sales of "white goods" like fridges, washing machines, and microwave ovens. Furniture is also very sensitive to the business cycle. Listed companies which sell these types of goods are known as "cyclical shares" because their shares tend to go up and down with the business cycle. A good example of a cyclical share is the furniture and white goods retailer, Lewis. During 2020, once the pandemic became a factor, its share price fell heavily to a low of 1222c on 20th August 2020. As the virus has come more under control with the steady roll-out of vaccinations and the improving economy, Lewis shares have risen to 3960c almost a year later. Conversely, "defensive shares" are shares whose business is not much impacted by the business cycle, like pharmaceutical and medical companies.

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