Our approach is different from that of most others. We first attempt to determine the general conditions of the stock market and economy, the existing phase of the cycle of those two entities, and the critical factors that will influence them. This is done in a common sense and practical manner and is based upon current and historic stock market and economic data. Our research efforts attempt to forecast and explain domestic and worldwide investment trends through the use of clear written and graphic presentations. Our conclusions are presented in the research studies that are described here. When viewed in this way, the term “market” as usually understood becomes less meaningful and the general terms “bull market” or “bear market” become misleading. Major stock groups may be in either a bull or bear trend while another group is acting very differently.
Examples of Sector Rotation
Most investors and economists believed the stock market was a single unit with one major trend. Our basic research in the early 1960s proved that to be a misconception. Our firm developed four major sector stock market averages and about 75 individual groups for which we maintained a vast amount of data. The tables below illustrate the annual rates of change for important segments of the stock market during four time periods, and how an investor could possibly have profited from an awareness of these diverse trends on an investment basis.
| Year | Traditional Growth Average | Technology Average |
|---|---|---|
| Technology stocks were outstanding in 1998 and 1999, but they became exploited and lost value due to excessive speculation. Investors then bought more conservative stocks and did not lose as much. Some individual group averages rose in 2000 and 2001. | ||
| 2001 | -8.57% | -35.73% |
| 2000 | -2.51% | -38.64% |
| 1999 | 8.83% | 140.37% |
| 1998 | 24.73% | 70.70% |
| Year | Cyclical Average | Traditional Growth Average |
|---|---|---|
|
Traditional growth stocks, including quality growth companies in industries like foods and healthcare, are recession-resistant. During a period that included two recessions, 1958 and 1960, they performed much better than cyclical companies. Cyclical companies are more sensitive to swings in the economy. A similar situation occurred in the 1989 to 1991 period |
||
| 1961 | 18.20% | 24.30% |
| 1960 | -18.50% | 25.80% |
| 1959 | 16.80% | 44.00% |
| 1958 | 37.60% | 65.50% |
| 1957 | -20.20% | 14.70% |
| Year | Cyclical Average | Traditional Growth Average |
|---|---|---|
|
Traditional growth stocks, including quality growth companies in industries like foods and healthcare, are recession-resistant. During a period that included two recessions, 1958 and 1960, they performed much better than cyclical companies. Cyclical companies are more sensitive to swings in the economy. A similar situation occurred in the 1989 to 1991 period |
||
| 1991 | 23.86% | 32.25% |
| 1990 | -20.13% | 2.48% |
| 1989 | 13.96% | 42.36% |
| Year | Capital Goods Average | Consumer-Related Average |
|---|---|---|
|
In the 1971 to 1973 period, wage and price controls existed, which helped consumer product sales since prices of these items were cheap. Once these controls were taken off, both commodity and capital goods prices rose and capital goods companies such as papers, chemicals, and machinery organizations were able to increase prices and boost their earnings. |
||
| 1973 | 22.01% | -38.59% |
| 1972 | 20.71% | 11.24% |
| 1971 | 11.15% | 25.67% |
*all these returns exclude dividends