Sector Relative Strength By 10-Year T-Bond Movement

When the 10-year Treasury bond moves higher or lower, there’s a corresponding movement of stock sectors. For the most part, cyclical stocks do well and consumer stocks lag. I wanted to show what the historical relationship has been.

I went to the data library hosted by Dartmouth Professor Ken French. He has a listing of 49 industry groups going back to 1963. I broke down the daily relative performance by days when the yield on the 10-year Treasury rose, stayed the same, and fell.

The following results are annualized. In other words, when the yield on the 10-year T-bond rose, gold stocks outperformed the market by an average of 26% per year. When the yield on the 10-year fell, gold stocks underperformed by 23% per year.

Sector Lower Same Higher
Gold -23.00% -7.05% 26.00%
Coal -15.78% 0.28% 25.98%
Mines -17.71% 9.59% 22.94%
Steel -20.78% -6.50% 19.29%
Mach -13.69% 0.63% 15.28%
Fin -9.26% 1.80% 14.12%
Txtls -14.55% 3.91% 13.35%
Chips -11.90% -2.05% 11.61%
FabPr -16.83% -7.90% 9.68%
Hardw -9.19% -0.59% 9.21%
Oil -4.42% 0.12% 9.03%
Autos -9.94% -7.96% 8.59%
LabEq -8.42% 6.10% 7.06%
Clths -5.08% 0.46% 6.57%
Fun -1.33% 9.20% 5.89%
Rubbr -4.52% 5.62% 5.36%
Agric -7.57% 15.07% 4.96%
Cnstr -5.24% 0.40% 3.52%
Chems -2.71% -1.85% 3.28%
RlEst -12.84% -6.19% 3.12%
BusSv -3.04% 1.86% 2.60%
Boxes 0.60% -3.12% 1.78%
Aero 0.45% 7.65% 1.71%
Ships -3.99% 1.26% 1.60%
ElcEq 5.68% 2.10% 0.55%
Books -1.66% 3.55% 0.12%
Paper 2.06% -4.46% -0.41%
BldMt 0.68% -1.30% -0.53%
Trans 0.12% -0.34% -0.73%
Toys -7.55% 7.76% -0.83%
Whlsl 2.99% 2.19% -1.33%
Rtail 6.99% -3.93% -3.01%
Telcm 4.98% -10.47% -3.22%
Other -6.73% 2.28% -5.62%
Meals 10.10% 6.55% -5.63%
Insur 6.57% 1.60% -6.14%
Util 7.73% -4.30% -6.97%
Guns 8.00% 7.02% -7.37%
Softw -1.75% -13.53% -7.98%
Banks 7.12% -2.28% -8.01%
Food 16.16% 1.71% -9.76%
Soda 17.37% 0.54% -10.44%
PerSv 3.01% 2.54% -11.41%
MedEq 14.93% 13.41% -11.78%
Drugs 15.91% 9.99% -12.35%
Smoke 27.57% 4.22% -12.94%
Beer 22.66% 3.38% -14.14%
Hshld 15.37% 6.00% -14.14%
Hlth 13.04% 11.53% -17.10%

Posted by on December 13th, 2010 at 8:27 am


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