After each post-World War II stock market correction brought on by a recession, stocks have reached new highs. Whenever a recession does materialize, however, stock prices will surely turn down. There have been six recessions since 1960. The worst performing industries have been trucks and parts, machinery, airlines, automobile manufacturers, apparel, major regional banks and life and health insurers. Consumer staples include food processors, beverages, household products and retail grocery chains.
Health care includes the major pharmaceutical manufacturers and medical supply companies.
We would caution however that this is a highly cyclical and volatile industry. We tend to avoid recommending most of these poor performing industries simply because of poor fundamentals such as financial leverage, low return on equity, erratic revenue and earnings history, and poor dividend growth. We do, however, tend to recommend many stocks in the better performing industries for these same reasons. It bears repeating that dividends provide much of the long-term total returns from stocks. In other words, stock prices tracked earnings very closely over the long term.