Update on Cyclicals

Two weeks ago, I highlighted the fact that cyclical stocks had been on a roll. I was smart enough not to call a peak in cyclical outperformance, but it may have occurred just a few days after my post.
Last Monday, April 26, the ratio of the Morgan Stanley Cyclical Index (^CYC) divided by the S&P 500 broke 0.8 for the very first time and reached an all-time high. Since then, however, cyclicals have underperformed the market and yesterday was an especially ugly day. Since April 26, the S&P 500 has lost -3.17% while the CYC has lost dropped -6.19%. So if you’re a money manager, you can see where you don’t want to be.
It’s still far too early to say whether this is a turn in the cycle. But investors should take notice because once cyclicals start to underperform, the trend can last for a few years.
image939.png

Posted by on May 4th, 2010 at 11:16 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.