Cyclical fluctuations = when good and bad times follow each other on the stock market
Cyclical fluctuation is a multi-year rise in economic growth followed by a multi-year decline.
When investors eagerly buy stocks, stocks go up in price. As stocks rise, stock prices rise. When listed companies do well, they hire more employees. As workers ’wage levels rise, people consume more and companies make better results. This is called a boom or boom. In recent years, we have been able to enjoy it in Finland, because we have lived in good financial times.
When the growth rate starts to slow down and the cyclical peak is reached, the downturn begins. First, one guy decides to sell his shares, and soon the guys leave. When stocks are put up for sale at a faster pace than what people are willing to buy, the stock will fall in price. Stock prices are falling and confidence in the economy is weakening. Companies will have to lay off workers and consumption will fall. Until the business cycle changes again, and the whole thing starts all over again.
This phenomenon, in which the ups and downs follow each other, is called cyclical fluctuations.