The graph below shows some of the industries that have unusually extreme LTB betas, either positive or negative.
Source: Graph created by author using data from FactSet
Those on the left side could be described as economic recovery industries. They typically suffered poor returns in 2020 and are only recently seeing their stock prices recover. They are also most often considered value industries as opposed to growth industries.
The industries on the right side are a varied lot. Some are clearly associated with the “winners” in 2020, especially software, medical equipment, and solar. These are all growth industries in which a large portion of the expected cash flows are many years down the road. Consequently, they have been hurt by rising rates through the mechanism of the increased discount rate.
Other industries on the right side are sensitive to changes in interest rates through the economics of how their businesses operate. For example, the demand for real estate and home construction is strongly influenced by mortgage interest rates—when rates move up, demand falls. Similarly, gold miners are affected by the price of gold, which in turn is affected by interest rates because gold does not provide any interest or dividend income, and when interest rates rise, the opportunity cost of owning gold increases, making it a less attractive store of value.