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Transport, health care and utilities are the sectors that will benefit most from interest rate cuts…

A comparison of the performance of individual sectors during last year’s decline in U.S. Treasury rates shows that

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Transportation, health care and utilities are the sectors that will benefit most from interest rate cuts. On the other hand, the US interest rate was not significant in the consumer goods and consumer staples economic sectors. Gyeonggi consumer goods refer to goods that are not essential to life, such as clothing and electronics. As the 10-year U.S. Treasury rate, a barometer of market interest rates, has continued to decline over the past 10 days, attention is turning to whether similar sectors will benefit from the past year.

Trends in 10-year US Treasury bond yields.
Transportation, health care and media stocks rose the most as the yield on 10-year U.S. Treasury bonds fell last year.

By comparing the daily economy index by sector KRX with the 10-year US Treasury bond yield on the 9th, it was found that the transportation industry showed the highest correlation with the 10-year US Treasury bond yield (hereinafter referred to as US Treasury bonds). at a time when government bond yields fell sharply from October 23 to December 27 last year.

The KRX transportation index showed a correlation of -0.938 with US bonds. This is a negative correlation. In other words, as US bond yields fell in response to expectations of a rate cut, on the contrary, transportation stocks rose significantly. In fact, the KRX transportation index also increased by 26.5% during this period from 790.86 to 1,000.58, the best performance among the 13 industry indexes studied. KRX transport is an index that includes HMM, Korean Air, Hyundai Glovis and Hanjin Kal.

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However, the sharp rise in stock prices during the KRX Transportation era, which covers shipping companies, was largely influenced by an attack by Yemen’s Houthi Islamic rebel on Israeli merchant ships in the Red Sea in mid-December last year, which caused shipping companies to bypass the Suez Canal. Shipping company stock prices soared as shipping fees increased at the time.

The second is KRX Healthcare. The index showed a correlation of -0.905 with US bonds. During this period, the share price increased by 25.1%, the second highest result after KRX Transport. The index included Samsung Biologics, Celltrion, HLB, Alteogen and SK Biopharmaceuticals.

Investment sentiment in the healthcare sector shows a high correlation with interest rates. This is because developing new drugs is expensive. Share prices of major health care companies remained high earlier this year on expectations of a U.S. interest rate cut in the second half of the year, but some gains have returned due to delays in rate cuts.

In second place was KRX Media & Entertainment with a correlation of -0.895. However, the industry index includes a number of so-called growth stocks such as Naver, Kakao, Krafton and NCsoft. Therefore, it will certainly react very sensitively to interest rates.

On the other hand, economy consumer staples and consumer staples recorded correlation coefficients of -0.310 and -0.149, respectively, indicating a change that does not appear to have much to do with U.S. bond yields. LG Electronics, Hanssem, Hotel Shilla and Shinsegae were included, which appears to be due to the fact that share prices moved differently depending on industries such as home appliances, travel and distribution within the index.

For consumer staples, the index includes AmorePacific, LG Household & Health Care, E-Mart and Nongshim. Essential consumer goods literally refer to industries that produce consumer goods that are essential to everyday life. Compared to other stocks, stock price movements often occur regardless of economic changes. Naturally, there is a tendency for the 10-year US bond rate to trend separately.