As the election draws closer, and the problems in Europe and China become more front-page copy, we are seeing some apprehension sneak into the nice rally that has occurred since that low on June 4th, 2012. Up until this point, we have seen some strong up-moves in Consumer Discretion, Healthcare, and Financials. If you are just looking at the large-cap (S&P 500) kind of sector performance, you would add Technology, but overall the Technology sector has been pretty disappointing. It is not just Apple that has carried large-cap Tech, but it has been a very small group of super-stars that have dominated that distortion. Just look at the large disparity between the equal weight and market weight year-to-date returns for the Tech sector in the graph below.
Also, as you can see above, in every sector except three - Healthcare, Telecom and Utilities, the market weighted sectors have outperformed the equal weighted sectors this year.
Overall, the sectors have been very segmented in the last one year. There are four sectors that have enjoyed stellar gains—Telecom, Financials, Consumer Discretion, and Healthcare, while lagging far behind this top-rated group are Consumer Staples, Technology, Basic Materials, Industrials, Energy and Utilities.
Don Hays, Nicholas Warf and Justin Wood
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