What is the stock cycle and why is it a golden opportunity in 2025

The economy is recovering, but why is your portfolio still stagnant? It’s because you still don’t truly understand cyclical stock (cyclical stock)! Many investors are stuck with dividend stocks and slow-growing stocks, missing out on the “big jump and huge profits” from these sectors. When the market enters an expansion phase, cyclical stocks become a real income source. Let’s find the best entry points for 2025.

What is a cyclical stock? Why is it like an engine for profit?

Cyclical stock refers not just to ordinary stocks but to stocks with special characteristics—company prices and profits fluctuate in sync with the global economy. These companies thrive on increased demand for goods and services during strong economic growth and decline rapidly during recessions.

Because Demand and Supply are the main forces driving prices, each cycle can last 1 year, 5 years, or even 10 years, depending on the situation and industry.

###Four phases of the economic cycle you need to understand(

Recovery )Recovery( — The economy emerges from a downturn and begins to rise. During this phase, cyclical stocks are sensitive and have a clear goal: growth.

Peak )Peak( — The economy is at its zenith, company profits are at their highest, and stock prices soar accordingly.

Recession )Recession( — The economy enters a downturn, demand decreases, and profits fall.

Trough )Trough### — The worst is over, but this is the best entry point for long-sighted investors.

In which industries do cyclical stocks appear?

Not all industries, but here are some examples:

• Maritime shipping — The better the economy, the busier the trade and transportation.
• Refining and petrochemicals — Profits fluctuate with oil prices.
• Agriculture and food — Production and prices are linked to seasons and demand.
• Coal and minerals — Fluctuate with construction and manufacturing activities.
• Steel — The more infrastructure projects, the higher the steel demand.

6 cyclical stocks to “must own” in 2025

( 1. Nvidia )NVDA### — The conqueror of the AI universe

A leader in AI chips, controlling over 80% of the market. With the growth of data centers and relentless AI investments, profits are expected to grow by 35% in 2025.

Although P/E is at 40x, the PEG Ratio is only 1.2, making it very attractive given such high growth. Plus, it holds over $20 billion in cash and almost no debt.

( 2. Caterpillar )CAT### — The giant of global construction

With $1.2 trillion in infrastructure projects in the US and expanding markets in Asia, Caterpillar benefits greatly. Revenue is projected to grow 8-10% in 2025.

P/E is just 15x, backlog stands at $30 billion, and it has a consistent dividend increase for 25 years, making CAT particularly appealing.

( 3. JPMorgan Chase )JPM### — The big bank for interest rate cuts

As the Fed begins lowering interest rates, JPM benefits from increased lending. Profit is expected to rise by 11%.

P/B is at 1.8x, very low for a bank with a high ROE of 16% and strong CET1 Ratio at 14.5%.

( 4. ArcelorMittal )MT### — Steel equals profit

Steel prices are expected to rise 15-20% in 2025 due to high demand from infrastructure projects.

P/E is only 5x, very low compared to industry average, and Free Cash Flow Yield reaches 15%, enabling share buybacks and steady dividends. It also invests in clean steel technology to reduce CO2 emissions by 30% by 2030.

( 5. LVMH )LVMUY( — Wealth never fades

A luxury goods empire with over 75 brands )Louis Vuitton, Dior…###, still capturing the purchasing power of the wealthy even during downturns. Gross profit margin is 65%, with continuous growth over 10 years.

China’s recovery will boost sales in 2025. Additionally, founder Bernard Arnault owns over 40%, showing strong confidence.

( 6. Lennar Corporation )LEN( — New homes for the “interest rate cut” era

With interest rates expected to fall below 5.5% in 2025 and Millennials entering first-time homebuyer age, demand for new homes will rise.

P/E is just 10x, profit margin 21%, and it has 300,000 lots bought at low prices. Lennar’s stock is a must-watch.

Other high-priced cyclical stocks

Semiconductor industry — ASML, MediaTek, SK Hynix, Qualcomm are benefiting from the AI boom, with the market expected to grow 15% in 2025.

Automobile manufacturers — Volkswagen, Hyundai, BMW, BYD benefit from the cyclical nature of consumer vehicle replacement. Global sales are projected to increase 8%.

Other banks — Bank of America, Goldman Sachs, JPMorgan are poised to expand as the global economy truly recovers.

Advantages of investing in cyclical stocks

✅ Maximum profit opportunities — High volatility equals high profit potential. Skilled investors can make significant short-term gains.

✅ Understanding the economic cycle — Investing in cyclical stocks helps investors predict long-term market trends using economic cycle data.

✅ Diversifying your portfolio — Combining cyclical stocks with others reduces overall risk.

Disadvantages to be aware of

❌ High volatility — Prices fluctuate rapidly, which can cause short-term losses for investors without strong nerves.

❌ Requires deep understanding — Successful investing demands knowledge of economic cycles and advanced analysis; otherwise, it’s like swimming in the ocean without a compass.

❌ External risks — Government policies, global financial situations, or unforeseen crises can drive stock prices down.

❌ Not suitable for long-term — Due to high volatility, these stocks are not ideal for investors seeking stability.

Cyclical stock vs. Defensive stock )Defensive stock(

Everything has two sides. Cyclical stocks )Cyclical( are opposite to Defensive stocks, which perform well regardless of the economy.

• Cyclical — Rise and fall with economic conditions, e.g., automobiles, hotels, industries.
• Defensive — Sell essential goods that people need in good times and bad, e.g., Coca-Cola, JNJ, utilities.

Smart investors hold both types to balance high growth )Cyclical( and confidence )Defensive.

Summary — 2025 is the year of Cyclical Stocks

In investing, it’s not just about holding stocks quietly but about timing, industry selection, and choosing the right companies.

Cyclical stocks offer a once-in-a-lifetime opportunity for big profits, but require knowledge and precision. If you understand economic cycles and industry specifics, you can make smart entry and exit decisions.

In 2025, the economy is in Recovery. The world is full of positive signals, investment projects are expanding, and demand is rising. If you are to invest now, cyclical stocks are an unmissable choice.