Which Sectors to invest when Corporate Profit declines ?

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Defensive sectors to invest into
Defensive sectors to invest into

What Comes after FED rate hikes , Answer is similar Decline of Corporate profits this is been proven , Below chart shows the relation between FED rates and Corporate profit.

FED Funds rate vs Corporate profits

The Fed Funds rate and the profits cycle generally correlated well, rising as profits surged and falling as profits decelerated, with the exception of the time immediately following the Global Financial Crisis. That historical link suggested that monetary policy was a good anchor for the expansion of the economy and of earnings.

There have been instances when the Fed increased rates in spite of the earnings cycle slowing down (i.e., 1989 or 2005). However, investors may encounter this very uncommon scenario if our projection for earnings growth proves accurate and the Fed keeps raising interest rates.

So what can be done?

As one might anticipate, defensive industries typically perform better. That’s particularly intriguing given that the present debate appears to be focused on whether to emphasize growth or cyclicals, with little reference to traditional defensive industries.

Defensive sector returns when Corporate profit declines:

SectorAverage Annual Performance
Health care28%
Cons Staples24%
Utilities23%
Comm Svcs18%
Cons Disc17%
Info Tech17%
Real Estate*16%
S&P50015%
Industrials13%
Energy10%
Financials10%
Materials8%
Sector Returns during low profit period of S&P500

Here is our Stocks selections for Defensive stocks :

you might also want to check out our chart section. we got plenty of good charts to help you make good investment decisions.