Cyclical stocks are associated with which of the following characteristics?

Cyclical stocks are characterized by their earnings that tend to fluctuate with the business cycle. These stocks typically belong to industries that are sensitive to economic changes, such as manufacturing, construction, and automotive. When the economy is booming, companies in these sectors experience increased demand for their products and services, leading to higher earnings. Conversely, during economic downturns, demand decreases, causing their earnings to decline significantly.

This characteristic of cyclical stocks is essential for investors to understand as it can influence investment strategies based on economic forecasts. Knowledge of how these stocks perform in various economic climates can help investors make informed decisions regarding buying or selling these types of investments based on their market expectations.

The other options highlight traits more typical of defensive stocks, which maintain stable dividends and consistent growth regardless of economic fluctuations, or which may exhibit resistance to downturns. Such traits do not align with the nature of cyclical stocks, which are inherently tied to the ebbs and flows of the economy.