Think quickly: what is the only sector of the U.S. stock market to beat the S&P 500 index during each of the past three decades?
If you answered health care, go the front of the class. A fascinating table from Gluskin Sheff (via the Big Picture blog) shows that health care managed to do better than the broad market during 1980-89, 1990-99 and 2000-09. Pharmacy stocks and health care firms may not move quickly, but at least they move in the right direction.
Not so talented is the telecommunication services sector. It is the only sector that has somehow managed to lag behind the S&P 500 during each of the past three decades
The most volatile sector is information technology. It lagged behind the market during 1980-89 and 2000-09, but nearly quadrupled the market’s performance during the dotcom-obsessed ‘90s.
If there’s a moral here, it’s that innovation has no necessary relationship with profitability. Telecom and information technology have been hugely creative during the past three decades, but their innovation hasn’t consistently resulted in unusual profits for shareholders. If you’re looking for a good investment, it’s better to be pushing pills than pushing the boundaries of technology.
Freelance business journalist Ian McGugan blogs for the Financial Post