Companies in the Consumer Discretionary sector manufacture goods or provide services that people want but, don’t necessarily need, such as high-definition televisions, new cars, and family vacations. Luxury goods are within this sector.
The Textiles, Apparel and Luxury Goods Industry are in the Consumer Discretionary Sector. It includes manufacturers of Apparel, Accessories, Luxury Goods, Footwear, and Textiles.
The Consumer Staples sector consists of companies that provide goods and services that people use on a daily basis, like food, clothing or other personal products. You will always buy them despite any economic condition
Because of the constant demand for their products, defensive stocks tend to remain stable during the various phases of the business cycle. During recessions, defensive stocks tend to perform better than the market. However, during an expansion phase, they tend to perform below the market. A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market.
Cyclical stocks rise and fall with the business cycle (vs defensive stocks that remain stable throughout business cycles)
This seeming predictability in the movement of these stock’s prices leads some investors to attempt to time the market by buying these stocks at the low point in the business cycle and selling them at the high point.
Examples of companies whose stocks are cyclical include car manufacturers, airlines, furniture retailers, clothing stores, hotels and restaurants. When the economy is doing well, people can afford to buy new cars, upgrade their home furnishings, go shopping and travel. When the economy is doing poorly, these discretionary expenses are some of the first things consumers cut. If a recession is bad enough, cyclical stocks can become completely worthless as companies go out of business.