Counter-cyclical Leadership Across DM and EM Completely Unaffected by Recent Rally

Counter-cyclical stocks have been the leadership group all year in pretty much every region of the developed and emerging worlds. As the selloff that took place in early October unfolded counter-cyclical stocks gained even more ground on their cyclical peers, which is not surprising since counter-cyclicals typically outperform in times of turmoil. What is surprising is that the counter-cyclicals have maintained their leadership status even as global stock markets have rallied back over the last two weeks. To us this behavior strengthens the leadership status of counter-cyclicals and portends even more outperformance in the weeks and months to come.

In the below charts we show counter-cyclical stocks relative to cyclical stocks for all regions of the developed and emerging worlds.