Very few stocks are not affected by the changing of the seasons. In fact, there is the Seasonally Adjusted Annual Rate, or the SAAR. By adjusting for seasonal changes and trends, the market can create a more accurate average. This information is most often what gets reported to the public.

How It Works

Some goods and services are more popular or more easily available at a certain time of the year. The sale of toys, for example, increases during the December gift-giving holiday time. More ice cream is sold during the summer months than is sold during the winter. If investors look at the sales of these products only at their busy season or only in the off season, they would be given a false overview of the company. To prevent that from happening, the profits are averaged out over a twelve-month period.

Seasonal stocks do not necessarily rise in value during the busy time nor do they necessarily drop in value when it is off-season. When looking at stocks for seasonal items, the overall history of the stock must be taken into account to see whether or not it will be a good buy.

Cyclical Trends

Cyclical stocks follow the business cycle, which in turn follows the cycle of the economy. This is not done purposefully. It just so happens that the stocks, the business, and the economy are very closely linked. When the economy is going strong, the value of these stocks increases; consequently, when the economy is weak, these stocks drop in value.

Cyclical items are the goods and services that are not in constant demand. They are purchased when the economy is doing well. These items include vehicles, sporting goods equipment, and high-end electronics. If these items are not being purchased, it causes their stocks to lag.

Just as there are cyclical stocks, there are non-cyclical stocks. The profits of these stocks are not as closely linked with the economy as cyclical stocks. These companies provide the necessities of every day life, such as food products, health and beauty products, cleaning products, and services such as health care, electricity, and oil products.