The defensive character of noncyclical payday sectors
The defensive character of noncyclical sectors pays off during stages of weak economic growth. See at what stage in the economy cycle the different industries reach their profit peaks relative to the market.
This is a basis for a sector rotation strategy but the profit cycle is not the only selection criterion. Banks show a profit rebound in the early phase of a recovery because the countercyclical Fed policy that is often observed in this economic environment results in low interest rates. A steep yield curve helps banks to increase their interest margins.
Automobile manufacturers usually realize a profit rebound at the early stages of an economic rebound because consumer confidence improves and induces a higher demand for discretionary products. In this phase favorable financing is also available and especially car manufacturers can substantially increase their sales through financing initiatives like zero-percent financing and large discounts for new car sales. Cyclical industries like automobiles have a high operating leverage which means that they will benefit at the early stages of economic recovery because they experience a rise in sales. Also industries with high financial leverage benefit from rising sales volume. Fixed financial costs like interest expenses determine financial leverage.
Tags: joit, last will, Market, market cycle, market cycles, money, Partnership, payment, price, Private Annuities, tenancy