Cyclical Stocks Underperforming - Economy Expected to Slow

Below is a chart comparing the relative performance of the Morgan Stanley Cyclical Index verses the S&P 500 Index. When the trendline is rising the cyclicals are outperforming. When the trendline is falling cyclicals are lagging the market.

Clyclical stocks include names like US Steel, Caterpiller, Freeport McMoran, etc.


In mid-February, cyclicals pulled back sharply then attempted one more rally in March. Ultimately, the ratio failed to make a new high. In the last week cyclicals started to fall apart.

Due to the change in the economic outlook we have been repositioning the GWM Model Portfolio to emphasize the defensive sectors such as Consumer Staples and Utilities.
 
Consumer staples companies are less volatile and generally pay high dividends.  Companies such as Kimberly-Clark Corporation, McDonald’s Corporation, Clorox Company or ConAgra Foods Inc. make up this sector.


 

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