But, which cyclicals are doing the best?
Take a look at the chart below. It tracks the performance of the FTSE 350 General Retailers Index (red line) versus the FTSE 350 Travel & Leisure Index (green line) for the year-to-date. You can see that the retail industry is doing well. It’s up by close to 40%. However, not all cyclicals are good buys. The travel and leisure sector remains in a dismal state - and it’s significantly outperformed by retail.
Retailers are recovering well, but the travel sector remains a worry
Source: Financial Times
There’s some substance to retail’s bettered performance. According to the latest figures from the British Retail Consortium (BRC), retail sales are picking up at a good pace. Like-for-like sales are up 4.5% on last year’s April figures.
But as BRC director-general Stephen Robertson himself concedes: "Let's be cautious... Following a tough winter, there's some pent-up demand but there's no reason to think customers suddenly feel flush or eager to spend." Cyclical sectors are often unpredictable, and the tide could turn on a fresh bout of bad economic news. There’s clearly more to playing this recovery than simply choosing a cyclical sector at random. So, do your homework and pick carefully.
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