Menu Close
Posted in Contributors- Economic and Financial, Other Guys, Taken Down

Cyclical stocks underperform in April- Sober Look

This is a syndicated repost courtesy of Sober Look. To view original, click here. Reposted with permission.

Emerging markets cyclical stocks have been trailing defensive shares for some time, as investors stay uneasy about global growth.

Barron’s: – While the MSCI Emerging Markets Index has a price/earnings ratio of 10.3 times the next 12 months of earnings, the average “cyclical” stock, whose earnings are linked to the strength of the global economy, has seen its valuation fall to 9.6 times. The average “defensive” stock, meanwhile, has a P/E ratio of 15.1 times. The 5.5-point gap between the two is more than twice the average of 2.7 points since 1995, according to UBS data, and it’s been at least that high for the last six months.

But now, in another sign of the “spring slowdown” (discussed here), US cyclical shares – which have been beating the market through most of 2013 – have underperformed in April.

Source: Ycharts (click to enlarge)

Similarly to emerging markets, US defensive share valuations have been quite lofty on a relative (and one could argue absolute) basis. Now this gap is widening further.

Source: WSJ

This is one of the reasons economists are so focused on China. The nation’s growth will be the key determinant of a number of cyclical shares’ relative performance going forward. So far investors haven’t been impressed.

This is a syndicated post, which originally appeared at Sober LookView original post.

Wall Street Examiner Disclosure: Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. No endorsement of such content is either expressed or implied by posting the content. All items published here are matters of information and opinion, and are neither intended as, nor should you construe it as, individual investment advice. Do your own due diligence when considering the offerings of information providers, or considering any investment.

Related Posts

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.