Rate-sensitive stocks outperform

Encouraged by signs weaker economic activity, attractive valuations and earnings security, investors are continuing to seek out interest rate sensitive stocks. Over the past year, our index of interest rate-sensitive shares (i.e. banks, utilities and other yield sensitive companies) rose by 5.7%. This contrasts with a fall of 21.4% in cyclical stocks and a 14.0% drop in defensive shares. Property Trusts, which are both interest rate-sensitive and defensive, recorded a total return of just under 12%.