Performance – Cyclicals Outperformance Following the election, U.S. cyclical stocks have significantly outperformed, reflecting investor optimism about the new administration’s pro-growth policies and economic resilience. Image: Morgan Stanley Research
MSCI Cyclicals/Defensives Return During anticipated economic expansions, investors lean towards cyclical stocks for their growth potential, while defensive stocks serve as a buffer during economic downturns. Image: Goldman Sachs Global Investment Research
S&P 500 Valuation – Shiller’s Cyclically-Adjusted Price-To-Earnings (CAPE) Ratio The Shiller CAPE ratio is high compared to historical norms. While valuation metrics aren’t reliable timing tools, investors should note that extended periods of high valuations typically lead to lower future returns. Image: Morgan Stanley Research
U.S. Stocks – Cyclicals vs. Defensives Investor sentiment is often reflected in the performance of cyclicals versus defensives. Typically, expectations of economic growth lead to a preference for cyclicals, resulting in their outperformance relative to defensives. Image: Goldman Sachs Global Investment Research
Cyclicals vs. Defensives Performance and U.S. 10-Year Treasury Yield The rise in yields is confirming the relative strength of U.S. cyclical stocks as they respond positively to favorable economic indicators while U.S. defensive stocks face pressure. Image: Morgan Stanley Research
Cyclicals vs. Defensives Performance Investor sentiment often reflects in the performance of cyclicals versus defensives. Expectations of economic growth typically lead to a preference for cyclicals, causing them to outperform defensives. Image: Goldman Sachs Global Investment Research
Stocks – Cyclicals vs. Defensives Cyclicals and defensives are useful indicators of investor sentiment. As investors expect economic contractions, they often shift towards defensives, resulting in their outperformance compared to cyclicals. Image: Goldman Sachs Global Investment Research
Hedge Funds’ Cyclical vs. Defensive Positioning During economic expansion, investors favor cyclicals over defensives. The current low hedge fund exposure to cyclical vs. defensive sectors may present a potential opportunity for contrarian investors. Image: BofA Global Research
Risk Appetite in Flows After Adjusting for Seasonality and Cyclical Growth Market sentiment is currently robust, with risk appetite in flows at the 85th percentile, falling short of extreme levels. Image: Deutsche Bank Asset Allocation
Cyclical Sectors’ Relative Performance vs. Defensive Sectors Around the First Fed Cut After the first Fed interest rate cut, defensive stocks have historically shown stronger performance relative to cyclical stocks. Image: BofA US Equity & Quant Strategy
Indexed Return of Cyclicals vs. Defensives ex. Commodities and ISM Manufacturing Index Equity industry rotations are pricing in a soft landing. Image: Goldman Sachs Global Investment Research