| Revival industry groups that have historically outperformed
the S&P 500 index on a risk/return basis:
Electronics - Semiconductors
Aerospace/Defense
Computers - Software
Manufacturing - Diversified
Electrical Equipment
Trucks and Parts
Machinery - Diversified
Office Equipment
Banks - Money Center
Chemicals
Banks - Major Regional
Insurance - Multi Products
Financial - Diversified
Railroads
Oil -- International
Household Products
Automobiles
Personal Finance
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Revival
Review and Analysis
The US economy is currently in the early Revival phase (Revival
1). In the Revival phase, the indexes of industrial production turn
up (the Federal Reserve's index and the National Association of Purchasing
Managers index) and non-farm payrolls increase (as measured on a 3-month
moving average).
The early Revival phases last 6 months, and then the Revival phase
begins. We now only list the industry groups for the combined early
Revival and Revival phases since we want to have an average holding period
for each stock in excess of one year.
From 1980 to 1996, both the stock and bond markets have had
excellent returns in the early Revival phase. The S&P
500 stock index has had an average annual return of 26.11%, and the
Lehman bond index had an annual return of 10.44% in this phase. The
current early Revival phase began on February 5, 1999.
The industry groups that have historically outperformed the S&P
500 index on a return/risk basis in the combined early Revival and Revival
phases are listed in the Industry Column to the left. Of course, not every
industry group outperforms the broad indexes in every phase, but investors
would be wise to focus their portfolio holdings in these industry groups.
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