The business cycle sets the parameters for the sector rotation strategy. Sectors with a high cyclical component will outperform at the early stages of an economic expansion while noncyclical sectors will tend to underperform during an expansion phase relative to the market. The cyclicality of a sector allows predictions about the development of earnings across business cycles. For example, the business of IT hardware companies depends on the capital expenditure (CAPEX) plans of other companies. In an economic slowdown when CAPEX is scaled back or postponed, IT hardware companies run a higher risk of being downgraded due to a deterioration of their credit protection measures. The most recent examples are the telecommunications equipment companies Alcatel and Ericsson. Both suffered from the lack of demand by telecommunications companies in 2002.