Fed Raises Payoff From U.S. Industry-Group Picks: Chart of the Day

U.S. stock investors stand to gain more from making astute picks among industry groups as the Federal Reserve carries out a second round of government-bond buying, according to Talley Leger, a Barclays Capital analyst.

As the CHART OF THE DAY shows, investing by industry has made relatively little difference this year. The chart depicts the percentage-point gap between the best and worst performing industry groups in the Standard & Poor’s 500 Index, along with full-year data since 1990. The data was compiled by Bloomberg and based on the S&P 500’s 10 broadest group indexes.

This year’s differential may turn out to be the narrowest in more than two decades. The gap stood at 26.2 points at the end of last week, and the smallest full-year figure was 26.4 points in 2006.

The Fed’s bond purchases and the resulting drop in the supply of Treasury debt favors cyclical industries, or those more sensitive to shifts in economic growth, Leger wrote in a Dec. 3 report.

Barclays Capital raised ratings on technology, financial and consumer-discretionary stocks. The last group, including retailers and media companies, was this year’s best performer at the end of last week. Health care, the worst performer, was cut along with telephone companies, utilities and makers of consumer staples, such as food and beverages and household items.

Each industry also must be assessed individually, Leger wrote, because groups no longer rise and fall together as they did earlier this year. “The performance pendulum has swung from the macro to the micro,” the report said.

(To save a copy of the chart, click here.)

To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

To contact the editor responsible for this story: James Greiff at jgreiff@bloomberg.net

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