The Difference between Cyclical Seasonal and Secular Markets

Prior to investing, investors and venture capitalists should first analyze the market and the current market trend. They should evaluate the market’s overall performance and its potential as well as the current market situation in order to identify the type of investment that will yield significant returns.

Basically, there are three primary markets that investors look into. These three include the cyclical market, the seasonal market and the secular market. These three markets are distinct from one another and each possesses unique characteristics.

It is extremely important that investors understand each market in order to gauge the current market situation and to profit from an investment. Hence, the following is a detailed explanation of each of the three aforementioned primary markets.

Cyclical market

In stock market, a cyclical stock is a stock that rapidly rises in value when the economic growth of the country is strong. More so, cyclical stock falls drastically when the host country experiences economic downturns.

Cyclical markets are sensitive to business cycles and are directly related to the growth and development of the country. Cyclical markets include luxuries such as the automobile industry and the recreational and tourism industry.

Seasonal market

Seasonal markets are markets characterized by expected trends in sales brought by seasonal periods such as the enrollment period, the Holiday season, Thanksgiving, Halloween and even the election period. Seasonal markets experience an outpouring of sales during a particular season they are tied with.

One major disadvantage of a seasonal market is the sudden and inevitable market collapse just after their peak season. Some of the most common seasonal markets include the school supplies industry (although some argue that it should be considered as a “semi-seasonal industry”,) beach resorts and the printing industry (especially during election period.)

Secular market

Compared to a cyclical market, a secular market is considered as a much secured and better investment – conservatively speaking. While cyclical markets are wholly dependent on the country’s economic growth, a secular market is somewhat independent.

Likewise, the secular market is also different from the season market in a way that the former has a longer time period compared to the latter.

A seasonal market is usually stacked at an annual basis. On the other hand, a secular market trend can lasts from five up to 25 years.

Some examples of secular markets include the mining industry and the financial intermediary industry. The mining industry experienced downturns from 1980 to 1999 due to the fall in the price of gold. Similarly, the financial intermediaries experienced several decade-long ups and downs during the 1900s.