Are Cyclical Stocks Leaving Orbit?

by: Eddy Elfenbein

Eddy Elfenbein submits: I’ve written about the surge in cyclical stocks before, but now the trend is starting to leave orbit.

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CYC-S&P 500

The Morgan Stanley Cyclical Index (^CYC) is up for 15 of the last 19 trading sessions. Not only that, it’s beaten the S&P 500 for the last six sessions, and 13 of the last 14.

As I write this, the index is up again today while the S&P 500 is down. The ratio of the CYC against the S&P 500 is at its highest in 30 years of data.

As a general rule, cyclical stocks outperform the market when long-term interest rates rise. But lately, that hasn’t been the case. The yield on the 30-year T-bond (^TYX) is down a bit over the past few weeks, and it’s been locked between 4.5% and 5% for nearly nine months.