At least for the rest of 2019 cyclicals are set to outperform defensives.
Cyclical stocks benefit from economic expansion whereas defensives do relatively better in a flatlining or declining economy.
The classic examples of defensive stocks are health care and consumer staples. Items such as toilet paper and prescription drugs tend to have what economists call inelastic demand. Regardless of the overall economic climate people need to take care of “business” and people need to take their meds.
On the other hand during periods of economic expansion individuals and companies take risk, buy more goods and buy more expensive goods - like cars, computers and pricey fanny-packs.
With the expected pick-up in global growth, the Fed on the sidelines and USD appreciation decelerating, the data show cyclicals are in a for a relative boost.
Monthly Update, April 2019 The S&P 500 advanced 4.05% even as the Dow Jones added 2.66%, the Russell 2000 increased 3.40% and the Nasdaq added 4.78%.
As for US bonds, they added 3bps.
Globally, the MSCI World Index added 3.60% and the Barclays Global Aggregate Bond Index declined -30bps.
The Euro Stoxx 50 added 5.47% in local-currency (Euro) and 5.43% in USD. Meanwhile, the Topix was up 1.65% in local-currency (Yen) and 92bps in USD.
