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The Top Performing S&P 500 Sectors Over the Business Cycle

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Top Performing S&P 500 Sectors Over the Business Cycle

The Top Performing S&P 500 Sectors Over the Business Cycle

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The business cycle fluctuates over time, from the highs of an expansion to the lows of a recession, and each phase impacts the performance of S&P 500 sectors differently.

And though affected sectors have different levels of average performance, any given period may see the outperformance of certain sectors due to external factors, such as technological advancements or high-impact global events (i.e. global pandemics, international conflicts, etc.)

The above graphic uses data from SPDR Americas Research to show the top performing sectors through the business cycle over almost 70 years.

The Business Cycle: Methodology

The dataset is based on the Conference Board’s Leading Economic Index, which assesses U.S. economic activity. This index includes 10 economic indicators that reveal typical turning points in the business cycle covering employment, consumer expectations, and financial conditions.

Overall from December 1, 1960 to November 30, 2019, the dataset covers:

  • 7 recessions
  • 7 recoveries
  • 12 expansions
  • 11 slowdowns

Returns are shown for all of the S&P 500 sectors with the exception of the communication services sector. This is because the sector was created relatively recently in 2018 and comprises previous technology, consumer discretionary, and telecommunication stocks already covered in the dataset.

1. Recession

Broadly speaking, a recession is a period of temporary economic decline characterized by two successive quarters of falling GDP.

During this period, consumer staples was the top performing S&P 500 sector, and the only one that has averaged a positive return. Utilities and health care, traditionally defensive sectors, followed next in line. Together, these sectors averaged 10% higher returns than the overall market during six of the seven recessions.

RankS&P 500 SectorAverage Period Return
1Consumer Staples+1%
2Utilities-2%
3Health Care-3%
4Energy-4%
5Consumer Discretionary-12%
6Materials-12%
7Financials-13%
8Industrials-15%
9Technology-20%
10Real Estate-22%

Real estate has been the worst performer during recessions, given its high sensitivity to discretionary spending as both household income and business activity tend to decline.

2. Recovery

A recovery is the phase following a recession where economic activity starts to increase and the economy begins to grow again.

Real estate outperformed all other sectors with an average 39% return. As monetary policy eases and interest rates fall historically after recessions, this makes purchasing real estate more affordable, in turn supporting the sector’s performance.

RankS&P 500 SectorAverage Period Return
1Real Estate+39%
2Consumer Discretionary+33%
3Materials+29%
4Technology+28%
5Industrials+27%
6Energy+27%
7Financials+23%
8Health Care+21%
9Consumer Staples+18%
10Utilities+15%

We can see in the above table that all sectors posted double-digit returns as consumer confidence and labor market conditions improved during recoveries.

3. Expansion

In this phase of the business cycle, the economy is growing beyond recovery. It is characterized by increased economic output, employment, and income.

Interestingly, market returns were the second-best overall after recoveries. Top sectors included technology (21%), financials (19%), and real estate (18%) as economic activity climbed to its peak.

RankS&P 500 SectorAverage Period Return
1Technology+21%
2Financials+19%
3Real Estate+18%
4Consumer Discretionary+17%
5Industrials+16%
6Energy+16%
7Materials+13%
8Consumer Staples+11%
9Health Care+11%
10Utilities+8%

The utilities sector has historically seen the slowest growth across all sectors as investors tend to favor cyclical S&P 500 sectors that rise with an expanding economy.

4. Slowdown

This phase is often considered a peak in the business cycle, where growth starts to decline, but the economy is not necessarily shrinking.

With 15% average returns, health care excelled during slowdowns. Often, investors reduce their exposure to cyclical sectors as they prepare for an economic downturn, looking for more defensive investments. Similarly, consumer staples saw strong performance on average.

RankS&P 500 SectorAverage Period Return
1Health Care+15%
2Consumer Staples+15%
3Financials+14%
4Utilities+12%
5Industrials+12%
6Technology+10%
7Energy+9%
8Materials+7%
9Consumer Discretionary+6%
10Real Estate+2%

Just as real estate saw a steep drop-off during recessions, it witnessed the lowest relative returns when the economy slows and costs tend to increase.

The Case for Diversification

The above data highlights how having a diversified portfolio of investments can help reduce sector-specific risk given the distinct performance trends of individual sectors over the business cycle.

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Sports

Ranked: Which NHL Team Takes Home the Most Revenue?

The Oilers are the second-highest earning team in the NHL and the Panthers are 26th. We show the top teams in the NHL by revenue in 2023.

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Visualization of NHL team revenues

Which NHL Team Takes Home the Most Revenues?

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

This graphic shows every NHL team’s revenue from the 2022/23 season using data from Forbes, compiled by JP Morgan Asset Management.

Ranked: The Highest-Earning NHL Teams

As the final round of the Stanley Cup Playoffs wears on, two teams on different ends of the revenue spectrum face off.

Despite representing a much smaller city than the other teams at the top of the ranking, the Edmonton Oilers have the second highest revenue in the league at $281 million. The Oilers have seen the fastest revenue growth over the past five years (13%) as the team has improved.

Team2022-23 Season RevenueValuation
Toronto Maple Leafs$281M$2.8B
Edmonton Oilers$281M$1.9B
Los Angeles Kings$279M$2.0B
New York Rangers$265M$2.7B
Montreal Canadiens$265M$2.3B
New Jersey Devils$240M$1.5B
Boston Bruins$239M$1.9B
Vegas Golden Knights$233M$1.1B
Chicago Blackhawks$228M$1.9B
Philadelphia Flyers$219M$1.7B
Washington Capitals$218M$1.6B
Dallas Stars$210M$1.1B
Pittsburgh Penguins$207M$1.2B
Detroit Red Wings$199M$1.2B
Vancouver Canucks$198M$1.3B
Seattle Kraken$197M$1.2B
Tampa Bay Lightning$196M$1.3B
Minnesota Wild$185M$1.1B
St Louis Blues$184M$1.0B
New York Islanders$183M$1.6B
Calgary Flames$183M$1.1B
Colorado Avalanche$182M$1.2B
Nashville Predators$180M$1.0B
Carolina Hurricanes$177M$0.8B
Anaheim Ducks$164M$0.9B
Winnipeg Jets$162M$0.8B
Florida Panthers$161M$0.8B
Buffalo Sabres$159M$0.8B
San Jose Sharks$158M$0.9B
Columbus Blue Jackets$151M$0.8B
Ottawa Senators$128M$1.0B
Arizona Coyotes$120M$0.5B

In the 2022/23 season, the Florida Panthers pulled off a major upset in the first round of the playoffs and fought their way to the finals before losing to the Vegas Golden Knights.

Despite the success last season, the Panthers still find themselves in the bottom six in this ranking, with $161 million in revenue. The team also has the second lowest operating income in the league, after Ottawa. Florida is an emerging hockey market though, with revenue increasing 9% over the past five years.

Other Hockey Revenue Highlights

  • Along with the Oilers, the Toronto Maple Leafs sit at the top of the revenue ranking. There is a key difference though: the Maple Leafs have a higher valuation-to-revenue multiple (10x vs 6.6x).
  • Professional hockey remains attractive to advertisers. In the 2022/23 season, team-specific sponsorship revenue was 36% higher than in 2018/19.
  • The team with the lowest revenue, the Arizona Coyotes, will be moving to Utah next season.
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