Consumer discretionary stocks won the low-rate environment

By Chuck Mikolajczak and Rodrigo Campos

NEW YORK (Reuters) - U.S. stocks have done very well during the long era of low interest rates, but as the U.S. Federal Reserve readies its first interest rate hike in nearly a decade, it is clear that some sectors have done better than others.

Consumer discretionaries, with a 383-percent return since the market bottom on March 9, 2009, were the place to be - benefiting both from low rates but also, in recent weeks, from expectations that a strengthening economy will keep companies in that sector doing well. From its March 2009 bottom, the S&P 500 has risen 195 percent.

Tops among the 10 major S&P sectors, the S&P consumer discretionary sector <.SPLRCD> has been powered by heavyweights such as Netflix Inc (NASDAQ: NFLX), which has risen an astounding 1,785 percent from the low, Chipotle Mexican Grill (NYSE: CMG), up nearly 1,400 percent and Amazon.com (NASDAQ: AMZN), up about 780 percent.

Other obvious yield plays - such as utilities and real estate investment trusts - did well earlier but have begun to sell off in recent weeks as investors awaited the start of a rising rate era and the first Fed move.

Big dividend payers, such as utilities <.SPLRCU> and real estate investment trusts (REITs), benefited as investors reached for yield in the low-rate environment of 2014. Utilities rose 24.3 percent in 2014, while the Vanguard REIT ETF (NYSE: VNQ), a broad representative of the sector, jumped 25.5 percent, both handily outperforming the 11.4 percent gain in the broad S&P index last year.

That performance reversed this year, as investors' expectations for the first rate hike in nearly a decade have risen. For 2015, utilities are down 11.3 percent while the REIT ETF is down 6.7 percent, lagging the 3.1 percent decline in the S&P 500.

Throughout the low-rate environment, companies that plowed money back into their own shares rewarded investors. The S&P buyback index <.SPBUYUP> has rocketed 325 percent from the low in 2009.

But in an illustration of the uncertainty surrounding the rate hike, the financials <.SPSY>, expected to benefit from higher rates, have shown a lackluster performance of late. Since Aug 19, the day before the S&P broke down from a 6-month trading range, the sector has declined 6.2 percent versus the 4.1 percent fall in the S&P 500.

(Reporting by Chuck Mikolajczak & Rodrigo Campos; Editing by Nick Zieminski)

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