In recent years, the companies have become more adept at managing interest-rate risk, but the stock prices still tend to move higher when rates move lower. Consolidation and cost control are a much bigger driver of stock prices, and with fewer takeover targets available, we don't see this group growing at quite the same rate as the past five years. Banks and finance companies tend to do poorly heading into recessions, as bad loans increase and as transaction income dries up. Insurance companies, particularly property and casualty companies, suffer when underwriting competition drives down premiums. Conventional pharmaceutical companies offer relatively predictable returns.
Biotech companies offer outsize returns with outsize risks.
Hospitals, HMOs and other care facilities are subject to mismatches between rate increases and cost increases. Medical equipment, products, supplies and services can do well. The whole sector is subject to regulatory oversight, which can be very deleterious, as we saw during the discussion of the Clinton health care proposals in 1993. Growth in this sector is subject to the same pressures as other capital goods, but demand for technology remained high during the great productivity investments of the 1990s. Also, companies that fall behind the technology curve or fall to third or fourth in segment market share are very vulnerable.