Gavekal Capital: Reviewing Equity Returns Post-Fed Statement

Thursday, March 19, 2015

Reviewing Equity Returns Post-Fed Statement

We noted yesterday that the US stock market took off after the Fed statement released (and the 2-10 year part of the yield curve came in significantly). So after the dust settles, which sectors led and which sectors lagged after the Fed statement?

The best performing sector, on an equal-weighted, USD basis, in the MSCI World yesterday was the energy sector.  Of all the market moves yesterday, this seems the least related to the actual Fed statement and looks like it was more of an oversold bounce. The energy sector remains in a bear market over the past year (-23.17%), far underperforming the average stock in the MSCI World over that period (+6.39%).  Two of the next three top performing sectors were counter-cyclical sectors which we find interesting. Utilities followed the rally in bond prices as it was up 1.45% and health care was up nearly a percent. For what it is worth, the worst performing sector was also a counter-cyclical (telecom). However, the second, third and fourth worst performing sectors were cyclical sectors. Given the recent fall in inflation expectations and the decrease in bond yields, an acceleration of the outperforming trend in counter-cyclicals relative to cyclicals seems likely.

MSCI World Index Performance By Sector
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