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Index IDEA: Cyclicals take volatility in stride while defensives lag

After a return of 22% in 2017, US large cap stocks as reflected by the Russell 1000® Index are up just 2.3% in 2018 including a 3% February decline. However, the Russell 1000® Growth Index is up 4.3% in 2018 and growth-oriented, cyclical sectors continue to lead despite the recent rough patch.

In 2018, the Consumer Discretionary (+5.8%), Technology (+5.5%) and Financial Services (+2.5%) sectors within the Russell 1000 had the highest returns among US equities, while traditionally more defensive interest rate sensitive areas like the Utilities sector (-4.1%) and Real Estate Investment Trusts subsector (-7.5%) have had negative returns.

Alec Young, managing director, global markets research, FTSE Russell:

“We find it interesting that despite increased volatility, January's cyclical industry leadership over defensive sectors continues. The reason for this is that inflation jitters and rising interest rates are taking a greater toll on higher yielding, rate sensitive, counter-cyclical industries than on less yield sensitive cyclical areas that offer greater exposure to healthy economic and earnings growth. Specifically, consumer services, technology and financials are handily outperforming the more counter-cyclical utilities and real estate industries YTD.”

Get more information on FTSE Russell US & Global Indexes.

 

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Views expressed by Alec Young of FTSE Russell are as of February 20 and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the LSE Group.

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