6 cyclical stocks to watch in 2025: How to seize this growth opportunity?

Recently, many investors have been eager to chase those consistently growing blue-chip stocks and high-dividend stocks, but they overlook another important investment category — cyclical stocks. When the global economy enters the recovery phase, these stocks are the easiest to achieve exponential profit growth. If your investment portfolio still performs mediocre under an improving economic backdrop, you are likely missing out on the key opportunity that cyclical stocks present.

What exactly are cyclical stocks?

Cyclical stocks are stocks of companies whose profits and revenues fluctuate with the economic cycle. These companies tend to exhibit a “peak-recession-bottom-recovery” cycle rather than linear growth.

The economic cycle is generally divided into four stages:

Recovery: The economy rebounds from a trough, corporate orders increase, and profit margins improve
Peak: Economic growth reaches its zenith, with maximum revenue and profits for companies
Recession: The economy begins to decline, companies face demand contraction pressures
Trough: The economy is at its lowest point, with corporate revenue and profits dropping to lows

The core characteristic of cyclical stocks is supply and demand-driven. When market demand is strong and supply tightens, valuations and performance of these stocks tend to rise rapidly; the opposite is also true.

Which industries are considered cyclical stocks?

In fact, cyclical stocks are widely distributed across the following key industries:

Shipping and Logistics: International trade volume directly impacts freight rates
Petroleum Refining: Cyclical fluctuations in crude oil prices affect gross margins
Agriculture and Food: Commodity prices and grain yields are affected by seasonal factors
Petrochemical Industry: Closely related to crude oil costs
Coal Industry: Power demand fluctuations drive price volatility
Steel Manufacturing: Demand from construction and manufacturing sectors determines price trends

6 cyclical stocks investors must watch in 2025

1. NVDA (NVIDIA)

As a dominant player in AI chips, NVIDIA holds over 80% of the global AI processor market share. Against the backdrop of global economic recovery and continuous expansion of data center investments, its growth rate is expected to reach 35%.

Although its P/E ratio is around 40, which appears high, its PEG ratio is only 1.2, indicating good value. The company has over $20 billion in cash reserves and virtually no debt, making its financial position extremely robust.

Real-time price reference: NVDA

2. CAT (Caterpillar)

This global heavy machinery manufacturing giant benefits from the US infrastructure investment plan worth $1.2 trillion. Revenue growth in 2025 is projected at 8-10%, with particularly strong growth in Asian and South American markets.

With a P/E of only 15, its valuation is attractive, and its order backlog has reached $30 billion. Notably, the company has a 25-year history of increasing dividends.

Real-time price reference: CAT

3. JPM (JPMorgan Chase)

The largest commercial bank in the US will benefit significantly from the interest rate cut cycle in 2025. The Federal Reserve expects to cut rates 3-4 times throughout the year, boosting loan demand, with an expected profit increase of 11%.

The bank’s P/B ratio is only 1.8, which is low relative to its 16% ROE. Its CET1 capital adequacy ratio is as high as 14.5%, providing ample risk buffers.

4. MT (ArcelorMittal)

A leader in the global steel industry, it will benefit from the boom in manufacturing and infrastructure worldwide. Market consensus expects steel prices to rise by 15-20% in 2025, driven partly by global economic stimulus policies and China’s economic recovery.

With a P/E ratio of only 5, its valuation is extremely low in the industry, and free cash flow yield reaches 15%. The company is investing in clean steel technology, aiming to reduce CO2 emissions by 30% before 2030, aligning with ESG investment trends.

5. LVMUY (LVMH, parent company of Louis Vuitton)

This luxury empire controls 75 top brands including Louis Vuitton and Dior. The consumption habits of the wealthy are relatively counter-cyclical, maintaining purchasing power even during economic downturns, and China’s economic recovery will further boost sales.

Gross profit margin is as high as 65%, far above the industry average. Founder and CEO Bernard Arnault owns over 40%, indicating strong management confidence in the company’s long-term prospects.

Real-time price reference: LVMUH

6. LEN (Lennar Corporation)

US homebuilders will benefit from falling mortgage rates in 2025. Mortgage rates are expected to drop below 5.5%, combined with a record-high average age of existing homes and a millennial home-buying wave, leading to sustained housing demand.

With a P/E of only 10, below the industry average, the company owns over 300,000 acres of reserve land, purchased at low costs during market downturns. Its construction profit margin is 21%, and construction speed is 15% faster than competitors.

Other investment opportunities around cyclical stocks

Semiconductor supply chain: Companies like ASML, MediaTek, SK Hynix, Qualcomm are profiting from the tech infrastructure and AI investment wave. Industry analysts forecast a 15% growth in this sector in 2025.

Automobile manufacturing: Volkswagen, Hyundai, BMW, BYD are experiencing a rebound in renewal cycles. Previously suppressed consumer demand is starting to release, with global new car sales expected to grow by 8%.

Banking sector recovery: Institutions like JPMorgan, Goldman Sachs, Bank of America will benefit from the interest rate cuts, as corporate loan demand rebounds in a low-interest environment.

How to start trading cyclical stocks — prioritize using demo accounts

Now that you understand the basic principles and specific opportunities of cyclical stocks, it’s time to turn knowledge into practice. However, trading cyclical stocks requires not only theoretical knowledge but also experience and market sensitivity gained through real market conditions.

Using real funds directly involves risks. A smarter approach is to first hone your skills with a demo trading account. For example, on the Mitrade platform, new users can get $50,000 virtual funds for risk-free practice.

Quick 3-minute account opening: Register in just a few steps via the official website, iOS, or Android app. Once opened, you can immediately trade products related to cyclical stocks, including CFDs or spread contracts, providing flexibility for long and short positions.

New customer benefits: 💸 Sign-up bonus of $100
💸 Zero commission trading
💸 Very low spreads
💸 Minimum deposit of $50
💰 Free $50,000 virtual account experience

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Investing involves risks and is not suitable for all investors

Key points to know before trading cyclical stocks

Successful cyclical stock investing requires understanding their unique behavior patterns:

1. Synchronization with economic cycles
Cyclical stocks closely follow macroeconomic trends. They perform well during economic expansion and can decline sharply during recessions. Investors must have basic economic cycle judgment skills.

2. Supply and demand-driven
The revenue and profits of these companies are directly determined by market supply and demand. When demand is strong, prices soar; when supply exceeds demand, profits shrink. This requires investors to closely monitor commodity prices and order indicators.

3. High volatility
Cyclical stocks are far more volatile than defensive stocks. This creates profit opportunities for short-term trading but also amplifies risks of losses during holding periods.

4. Multiple risk factors
Besides economic cycles, policy adjustments, global financial conditions, and geopolitical events can impact cyclical stocks. Investors need to establish a multi-dimensional risk warning system.

Weighing the pros and cons of cyclical stocks

Advantages

✅ Profit doubling potential: Compared to defensive stocks, cyclical stocks often double in value during economic recovery, offering greater short-term gains

✅ Cycle prediction value: By studying economic cycle data, investors can position themselves in advance, forming more scientific investment strategies

✅ Portfolio diversification: Combining cyclical stocks with defensive stocks can maintain balanced returns across different economic phases

Disadvantages

❌ Sharp price swings: During downturns, cyclical stocks may experience deep declines, putting psychological resilience to the test

❌ High professional requirements: Deep understanding of economic conditions and industry trends is needed; ordinary investors may easily make mistakes

❌ Black swan risks: Sudden policy changes, international conflicts, financial crises can cause unexpected shocks to cyclical stocks

❌ Difficulty in wealth preservation: Frequent price fluctuations make them unsuitable for long-term stable wealth accumulation

Differences between cyclical stocks and defensive stocks

We can refer to the opposite of cyclical stocks as defensive stocks or non-cyclical stocks. These companies produce essential goods or basic services with relatively stable demand.

Representative companies include Coca-Cola, Johnson & Johnson, Tesco, Diageo, NextEra Energy, etc. Whether the economy is booming or in recession, people always need beverages, healthcare, and electricity.

Cyclical stocks, on the other hand, produce optional consumption goods or production materials. Demand surges during good economic times and drops sharply during downturns.

Summary: Seize the opportunities of cyclical stocks in 2025

The art of investing lies in adopting differentiated strategies for different stock types. As a unique investment category, cyclical stocks require investors to have a keen sense of economic cycles.

Understanding the correlation between cyclical stocks and economic conditions — especially how they are affected by seasonality and demand changes — can significantly improve stock selection accuracy and timing. Developing this ability requires a combination of theoretical learning and practical experience.

The global economy in 2025 is in a recovery phase, making it an excellent time for cyclical stocks to perform. Whether you are a seasoned investor or a beginner, you should not miss this wave of opportunity. Starting with a demo account and gradually gaining experience is the most prudent and efficient path to successful investing.