Rising Real Rates: A Boon for Value and Cyclicals?

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The Russell 2000, Toronto Stock Exchange (TSX) Composite, Euro Stoxx 50, FTSE 100, Topix, and the ASX 200 each have 60-75% exposure to cyclical sectors. From 2000 until the end of 2020, a basket of these “cyclical” indices has outperformed a basket of “secular/growth” indices (S&P 500, Nasdaq, SMI, and MSCI EM) by 5.4% during periods of rising US real rates on average.

During two of these periods (March-October 2008 and July-December 2016), the cyclical basket outperformed the secular one by more than 8%. Moreover, while the cyclical basket has outperformed the secular basket by 4% year-to-date, it has still underperformed by 10% since the beginning of the COVID shock.


Rising Real Rates: A Boon for Value and Cyclicals?
Source: Bloomberg, Unigestion. Data as at 12 March 2021.

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