Equities: Select-Sector Trends 2020

  • 18 Dec 2020
  • By Erik Norland

On the 9th of January 2020, we published an article entitled, “In 2020, Equities are Partying Like It’s 1999,” pointing out the similarities between the end of the 1990s and the end of the 2010s:

  • Falling unemployment
  • Low and stable inflation
  • Soaring equity prices with technology stocks in the lead

As it turns out, on an economic level, 2020, with its deep, global, COVID-19 induced economic downturn, looked nothing at all like the exuberant prosperity of 1999.  Despite world-wide economic setbacks, equity markets made substantial gains and were led by the same sectors that proved to be the winners at the end of both the 1990s and the 2010s.  Moreover, by the end of 2020, market valuation levels, measured as a ratio to GDP, had vastly surpassed levels achieved in 1999 or 2000 (Figure 1). Or in 2019.

Figure 1: Equities are more highly valued vs GDP than at any time since before WW2

Unlike in 1999 and 2000, however, bonds don’t offer much of an attractive alternative.  Back then, yields were in the 5-7% range.  Today, even 30Y yields are still below 1.75%, and 10Y yields remain below 1%.  As such, given the low level of bond yields, one question arises: can equities sustain much higher valuation levels over the long term as long as interest rates stay low?

Equity-sector relative performance looks a great deal like what it did during the late 1990s.  Information technology, health care and consumer discretionary stocks led the 1990s, 2010s and so far in 2020 (Figure 2-4).  Meanwhile, energy and utilities did poorly in these three periods.  2020 has a few differences: in contrast to the 2010s, materials and telecom stocks did well.  Materials stocks also underperformed in the 1990s but telecom did quite well in the first internet boom. 

Figure 2: A Q3 rebound left major economies far from a fully recovery

Figure 3: IT, consumer discretionary and health care also dominated the 2010s

Figure 4: IT and consumer discretionary stocks led in 2020 as well.

The scatterplots of the 1990s versus the 2010s reinforce the idea that the two decades resembled one another.  Moreover, 2020 has been, in many ways, an extension of the 2010s with a similar group of sectors outperforming (Figures 5 and 6).

Figure 5: The 1990s and the 2010s sector performances were strongly, positively correlated

Figure 6: 2020 sector performance was, for the most part, a continuation of the 2010s (& 1990s).

Expectations for 2020’s trends to persist as we head deeper into the decade should be tempered as trends from one decade sometimes don’t continue into the next.  For example, during the first decade of the new century a very different set of stocks led during the difficult period from 2000 to 2009.  Energy stocks, which had been among the worst performers during the period of depressed oil prices during the 1990s were the big winners of the “noughties”.  Meanwhile, the tech and telecom high-fliers, which led the 1990s, suffered a sharp reversal during that first decade of the new millennium (Figures 7 and 8).

Figure 7: During the 2000s, roughly the opposite set of sectors outperformed

Figure 8: The 2000s reversed the 1990s sector performance pattern

Sector-relative performances reversed again from the 2000s to the 2010s.  Energy, materials and consumer staples, the big winners of the 2000s, were among the worst performers of the 2010s (Figure 9).  While IT and consumer discretionary stocks, which underperformed, turned out to be big winners in the 2010s (and in 2020). 

Figure 9: Sector performance reversed again from the 2000s to the 2010s

Bottom Line:

2020 is just the first year of the decade.  There is a long way to go.  The sectors that did well in the 2010s and 2020s may not turn out the be the ultimate winners of the decade.  As the 2000s and 2010s taught us, sometimes it’s the most beaten down sectors that have the greatest value.


All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author(s) and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.

About the Author

Erik Norland is Executive Director and Senior Economist of CME Group. He is responsible for generating economic analysis on global financial markets by identifying emerging trends, evaluating economic factors and forecasting their impact on CME Group and the company’s business strategy, and upon those who trade in its various markets. He is also one of CME Group’s spokespeople on global economic, financial and geopolitical conditions.

View more reports from Erik Norland, Executive Director and Senior Economist of CME Group.

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