Which sectors when?

by Andrew Newman
in Investing
27 Aug 2009 | 3 Comments

The impact of the economic cycle is not only important at the asset allocation level, it is also important to be aware of the historical returns between each of the major sectors of the sharemarket.

Different sectors do well in different economic conditions. A market that suits consumer staples and financials, for example, tends to see companies in the telecoms and oil and gas sectors not performing as well.

Which sectors when

The above shows the annualised relative performance of each US equity sector versus the S&P 500 Index in the major economic phases prior to the latest downturn, from April 1973 to May 2006. We believe the US is currently in a recovery phase.

Of course, there is no guarantee that this pattern will hold true in every cycle in every market, but history shows that these trends are repeated over the long-term.

The above article has been sourced from FIL Investment Management (Australia) Limited.

Important Information

The information provided is general in nature and does not constitute financial advice. While we have taken reasonable care in providing this information, it should not be construed as being specific to your investment objectives, financial situation or particular needs. It's important for you to consider these matters before making any financial decision and we recommend you seek financial advice.

Comments (3)

Ahhh! Thanks for the example. The table is more subtle than I realized.

1 Sep 2009, Jim Noonan, www.jimnoonan.id.au

Thanks for the comment Jim.

True, the annual returns are going to be modest.

The returns shown in the table are not actual returns but relative returns versus the S&P 500 Index.

For example, if the S&P 500 Index annual return was minus 28% and consumer discretionary shows a relative reurn of 3.8% for recovery, the actual return for consumer discretionary would be minus 24.2%.

1 Sep 2009, Andrew Newman, www.cmpfinancialplanning.com.au

Fascinating analysis, Andrew.

I take it that no matter what sector you look at - at this time of recovery, returns are going to be modest at best.

28 Aug 2009, Jim Noonan, www.jimnoonan.id.au

Which sectors when?

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