In a perfect market, you like to see little segmentation between the large and mid-cap action in a sector. That is true across most sector lines, but there is a distinct difference in several sectors now. For instance, the Financial and Consumer Discretion sectors both have a large discrepancy between the very strong action in their larger-cap stocks than those in the mid-cap range.
It is exactly the opposite for Technology as Apple weighs down the performance of the larger-cap Tech stocks, while the mid-caps are showing a very healthy resurgence. You can see these trends in the relative strength of the market weighted versus equal weighted S&P 500 sectors below.
The two worst acting sectors continue to be Telecom and Utilities. The last two years of cyclicality have been amazing as fears of economic and political transformation have had dramatic effects on stock performance. No other sector has been affected as much as Utilities. In fact, the sector's swings have been an outstanding quantitative tool to forecast impending market action. At this time, it is very negative, which is still pro-growth.
Don Hays, Justin Wood & Daniel Petzold
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