This year,
especially in February, there has been something of a cyclical bounce in the developed country stock markets. Since the beginning of the year, counter-cyclical stocks have underperformed cyclical stocks by 75 basis points in the MSCI World Index. However, when we look at it broken out by region we see that counter-cyclical stocks in Europe and in North America have both outperformed their respective regional cyclical stocks by nearly 2% this year. In addition, if we look at performance over the past year, we see that counter-cyclical stocks have outperformed cyclical stocks across all regions. Counter-cyclicals have been particularly strong in Europe and in North America.
If we strip out bond substitutes like utilities and telecom from counter-cyclicals and look just at growth counter cyclicals (health care and consumer staples), we see that growth counter-cyclicals have continued to outperform cyclicals year-to-date as well as over the past year. Thus, even in light of what feels like significant cyclical bounce lately, it has been in investors best interests to stay heavily involved in counter-cyclical stocks, especially those with a growth tilt.
