Wednesday, January 27, 2010

Three Decades of S&P 500 Sector Performance

The Big Picture details how the various sectors of the S&P 500 have fared over the last three decades:

Have a look at the table of S&P 500 sectors — the only one that has outperformed in each of the past three decades is health care. No, Medical and pharmacy inflation was not in your imagination.

Telecom services is the only sector to underperform in all three decades.
Below are two charts showing details of that table. The first shows the absolute performance of each sector over each decade, while the second shows the relative performance of each sector vs. the broader S&P 500 index over each decade. Please note that the order of the sectors move from best performing sector at the top (consumer staples) to worst performing sector at the bottom (telecom) over that 30 year period.

Absolute Performance

Relative Performance

No surprise with Telecom. After all it was just about 30 years ago (1984 to be exact) that AT&T lost it's monopoly power. But some may be a bit surprised by the performance of the consumer related sectors (both staples and discretionary). As reader tCA pointed out:
Somewhat surprisingly Consumer Discretionary almost did what Health Care did in terms of the outperformance in up and down markets. With the exception of 1% underperformance in the 90’s, it was right there.
tCA was surprised. I'm not. For 30 years+ consumption has driven growth within the United States (and actually outpaced economic output as detailed in the post Why Does it Feel Worse than Reported?). Combined with the rise of mega-retailers and cheap overseas manufacturing at the expense of "mom and pop" retailers and domestic produces (i.e. profit at the corporate level vs. income at the employee level), is it really a surprise these sectors were able to outperform?

But, while the turning point for the U.S. consumer may have begun in the last part of the decade, my guess is that any investor relying too much on the debt burdened U.S. consumer will be greatly disappointed in this next decade (though there may be billions of new consumers willing to take their place).

Source: Gluskin Sheff


  1. The charts are labeled "Absolute Performance." Does this include dividends? Or, is this solely price performance?

  2. My understanding is total return inclusive of dividends.

  3. Jake,

    To be fair, my comment was that I was surprised the outperformance of Consumer Discretionary didn't occur in the '90's and the underperformance in the '00's (i.e. the reverse of what really happened). Also, I didn't comment on Consumer Staples. Lastly, I suggested rolling the performance forward by a couple years to line up with the start of the early 80's bull.

    Otherwise, good site!