Counter-cyclical means moving against the economic (or business or market) cycle. For example, counter-cyclical business will make higher profits when the economy slows, and a counter-cyclical investment will rise when markets fall.
Investors may look for similar diversification by investing in other asset classes with similar properties (such as gold). Given that there is a limited supply counter-cyclical equity investments that can be expected to maintain that behaviour during really bad conditions (i.e. a major crash).
The term counter-cyclical is not only used of investments, and not only from the perspective of investors. It is also used:
- in discussions of economic policy (to describe policies and structures that counter-trends),
- as a description of economic trends (such as employment), and
- from the point of view of issuers (particularly sovereign issuers) to describe types of capital structured to become cheaper under adverse conditions.