The S&P 500 bottomed exactly eight months ago and has since rallied 64%. The U.S. economy was still contracting when the rally began, which is no surprise since financial markets tend to predict the direction of the economy anywhere from three to six months into the future.
As it turns out, third quarter GDP grew at a 3.5% annualized rate, vindicating the stock market’s rally. Whether the market has rallied too much is an entirely different discussion for another day. Today, I examined sector performance since the March 9 low. Take a look at the table below.
Clearly, economically-sensitive stocks have been outperforming strongly, something that one expects in bull, not bear, markets. “Cyclical” sectors outperformed in the eight months since the S&P 500’s bottom, with the financials sector jumping 140.6%, the consumer discretionary sector adding 81.5%, the materials sector growing 78.6% and the information technology sector gaining 77.7%. In contrast, “defensive” sectors like healthcare, utilities, and telecom underperformed.
The results in the table above should come as no surprise because these are often the sectors that benefit the most during this stage of an economic cycle. The diagram below from S&P Equity Research illustrates this very well.
Tomorrow I will explain why these sectors often perform the way they do in the different stages of the economic cycle.
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Peter J. Lazaroff, Investment Analyst
As it turns out, third quarter GDP grew at a 3.5% annualized rate, vindicating the stock market’s rally. Whether the market has rallied too much is an entirely different discussion for another day. Today, I examined sector performance since the March 9 low. Take a look at the table below.
Clearly, economically-sensitive stocks have been outperforming strongly, something that one expects in bull, not bear, markets. “Cyclical” sectors outperformed in the eight months since the S&P 500’s bottom, with the financials sector jumping 140.6%, the consumer discretionary sector adding 81.5%, the materials sector growing 78.6% and the information technology sector gaining 77.7%. In contrast, “defensive” sectors like healthcare, utilities, and telecom underperformed.The results in the table above should come as no surprise because these are often the sectors that benefit the most during this stage of an economic cycle. The diagram below from S&P Equity Research illustrates this very well.
Tomorrow I will explain why these sectors often perform the way they do in the different stages of the economic cycle.
--
Peter J. Lazaroff, Investment Analyst
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