The Overperforming Industries
The overperforming industries reflected the new regime in that they were heavily consumer-oriented, thereby benefiting from the lower taxes and higher confidence of the Reagan administration, and unaffected by foreign trade competition and therefore untouched by the strong dollar. Many of the overperforming industries, such as Aerospace, Pollution Control, Hospital Management, and the transportation industries, were also highly influenced by specific government policies, in contrast to the hands-off attitude of government toward most of the underperforming industries.
Thirty industries whose stocks overperformed the S&P 500 by at least twenty percentage points between 12/79 and 12/84 were previously outlined in table 4.3 in chapter 4. Most of them fell into six categories: media, retailing, foods, transportation, various capital goods, and new industries. Their strong stock price performance raised their share of the S&P 500 from 16.6% in 1979 to 23.1% in 1984, as can be seen in table 5. 1. By 1984 they equaled the underperforming oil, capital goods, and commodities industries, which five years previously had 2.4 times their weighting.
Some of the overperforming industries had cyclical recoveries in 1982- 1984 rather than secular long-term overperformance. This was true of the large retailers in General Merchandising and Groceries, Airlines, Truckers, and virtually all of the capital goods industries: Engines and Turbines, Household Furnishings and Appliances, Containers, Electric Equipment, Tire and Rubber, and Auto Parts. Based on a broader time period of 1/77-12/84, among these industries all but Engines and Tur-