-
Johnson & Johnson (JNJ)
-
UnitedHealth Group Incorporated (DE) (UNH)
-
Alimentation Couche-Tard Inc. (ATD)
-
Hydro One Limited (H)
As always, thank you for your insight.
Typically, when the business cycle is contracting due to either a combination of high inflation, rising interest rates, reduced consumer and government spending, the defensive sectors (consumer defensive, healthcare, and utilities) outperform. On the other hand, when the business cycle is rebounding and expanding, the highly cyclical sectors (tech, communications, consumer cyclical, materials, and materials) outperform.
In 2022, we saw the defensive sectors outperform, as the business cycle contracted. This year we have seen the highly cyclical sectors outperform, as the business cycle rebounds slightly. The market has so far been pricing in an expansion in economic activity, leading to highly cyclical sectors outperforming.
If inflation stays persistent and rates continue to rise, we would expect to see utilities, healthcare, and consumer staples outperform. If these sectors are to outperform if inflation is persistent and rates rise further, we like ATD, H, UNH, and JNJ.