how to identify secular trends
a stock is secular when the associated company earnings remain constant regardless of other trends occurring within the market companies are often secular when the primary business relates to consumer staples or products that most households consistently use consumer staples can include personal care items such as shampoo and toilet paper various food item producers and certain pharmaceutical companies a stock is considered a secular play if its revenues are likely to remain consistent regardless of other trends in the market for example consumer staples are likely to be strong secular plays because they will remain in demand even in times of recession secular vs cyclicalsecular stocks are very different from cyclical stocks which are securities whose price is impacted by the movement in the overall economy due to consumer buying power these are companies whose business model is most likely to suffer during an economic downturn cyclical stocks tend to be those whose profits depend on discretionary spending which tends to decline during recessions for example starbucks and nike are commonly considered examples of cyclical stocks because they are considered relatively expensive and non essential many consumers will reduce spending on these products when money gets tight special considerationssecular movements can proceed in either a positive or negative direction therefore the term does not always mean growth investors may be secular bears or secular bulls also secular can refer to subtle or dramatic movements as the term does not identify the degree of change the defining characteristics are the long term nature of the movement and the lack of impact of short term trends on associated activity while experts consider them to be long term secular trends are not necessarily permanent in his book stocks for the long run mcgraw hill education 5th edition 2014 jeremy siegel an economics ph d and finance professor at the wharton school university of pennsylvania argues that equity securities particularly u s equities are secular and will likely outperform the other major asset classes secularly or over the long term in support of his argument siegel points to the 130 years between 1871 and 2001 during any rolling 30 year period within this timeframe stocks outperformed all other asset classes especially bonds and t bills most experts agree that a 30 year period constitutes a secular trend 