To answer for this question, I have analyzed monthly gross domestic product (GDP) in Canada and Standard & Poor's (S&P) indices of various sectors of Toronto Stock Exchange (TSX).
In Canada, a slow down followed the burst of the information technology bubble. Between August 2000 and September 2002, in the information technology and telecommunication service sectors, stocks lost respectively 90% and 56% of their values. Stocks were worth 30.6% less in the consumer discretionary sector. Sectors that outpoerformed were the gold (+85.6%), consumer staples (+65.2%), utilities (+39.9%), and energy (+33.6%).
The table below shows how the various sectors of the stock market fluctuate over the business cycle. Business cycle is measure as short-run fluctuations in GDP.
|Sector||% Standard Deviation||Correlation with GDP|
|Diversified Metal Mining||21.65||.29|
- The stock market is procyclical, i.e. positively correlated with the business cycle, except the sectors of consumer staples and gold.
- The stock market is more volatile than the real economy.
- The most volatile sectors of the stock market are: the information technology and the diversified metal and mining.
In most sectors, the stock market leads the business cycle by three months.
The dataset used is available here.