Which classification of common stocks is typically considered less stable?

Cyclical stocks are considered less stable because their performance is heavily tied to the economic cycle. These stocks represent companies whose earnings and revenues fluctuate significantly with changes in economic conditions. During periods of economic growth, cyclical stocks tend to perform well as consumers and businesses increase spending. Conversely, during economic downturns, these stocks often falter as demand for non-essential goods and services declines, leading to decreased revenues.

In contrast, defensive stocks provide stability since they belong to companies that produce essential goods and services that consumers continue to purchase regardless of economic conditions. Blue chip stocks are shares in well-established companies known for their reliability and stability, typically delivering consistent performance and dividends over time. Income stocks are valued for the steady income they generate through dividends, thus maintaining a level of stability for investors seeking regular income. Therefore, cyclical stocks stand out as the category that experiences the most volatility and inconsistency relative to economic changes, making them inherently less stable.