In recent days considerable media attention has been given to the unrelenting strength of the stock market in view of an economic recovery that remains fragile and the overall uncertainty created by the inability of the legislative and executive branches of the federal government to avoid budget sequestration.
Particular note has gone to the string of advances and the record high levels achieved by the Dow Jones average of industrial shares, up 11% year to date. Against this backdrop, it is worth noting that the Grain-based Foods Share Index, compiled by Milling & Baking News, has risen 14% year to date, eclipsing the Dow and the 10% gain in the S.&P. 500.
A 14% jump in the G.B.F. index over roughly a 10-week period is a torrid (and unsustainable) pace of appreciation. Each of the companies included in the index is up for the year with standout gains of 20% for Archer Daniels Midland Co.; 20% for Campbell Soup Co.; 19% for ConAgra Foods, Inc.; 25% for Flowers Foods, Inc.; 15% for General Mills, Inc.; and 59% for Krispy Kreme Doughnuts, Inc. The advances come on the heels of outperformance in 2012, when the G.B.F. index was up 17%.
At one level the outperformance of the food stocks remains surprising since the sector normally lags broader indices during a roaring bull market. The gains could be explained, though, by improving performance of several of the industry’s companies together with tempered optimism related to the continuing concerns about the economic outlook.