For about six weeks, between the middle of January and the first week of March, inflation expectations embedded in the US Treasury market bounced after declining for the second half of 2014....
Two weeks ago we mentioned that over the past several years the last six weeks of each year has tended to either strongly favor cyclical stocks or counter-cyclical stocks. Today, we wanted to update that chart....
As we have noted before, this market has been somewhat unique in that counter-cyclicals have outperformed cyclicals since the market top in October 2007. As you can see in the first chart below, counter-cyclicals have outperformed by nearly 18% over the past seven years....
Early cyclicals have had a tremendous bull run over the past five years. They have managed to outperform the MSCI World Index by over 50% during this time. By far the most of any of our cyclical or counter-cyclical baskets....
We divide all stocks into two baskets: 1) cyclicals, which includes consumer discretionary, industrials, materials, technology and financials; 2) counter cyclicals, which includes health care, consumer staples, telecom and utilities. Generally the cyclical basket performs best when economic data comes in on the strong side...
We divide the MSCI World index into cyclical (including materials, industrials, technology and consumer discretionary, financials and energy) and counter-cyclical baskets (including consumer staples, health care, telecom, utilities). The relative performance of cyclicals vs. counter-cyclicals generally improves when the economic news is improving and contracts...
