What’s In A Sector?
For the first time in a long time, the Value portion of the S&P 500 outperformed the Growth portion. Granted, it was only over one week, but it could signal a reversal of a trend that has essentially been happening since 2006. Credit to Jeff Weniger at WisdomTree for his analysis on this subject.
From Jeff Weniger’s blog on WisdomTree.com, “It makes you wonder: Is this it? Was the vaccine news “the thing” that is big enough, bold enough, life-changing enough to upend the market’s dynamics?”
I will certainly not claim to know the answer in this particular blog post, but if there is a viable vaccine on the horizon, it could make what has been unattractive (energy, banks, industrials) attractive once again. And, as you can see from the chart above, just the promise of a vaccine sent those particular sectors soaring.
The sectors of the S&P 500 include different types of companies and are broken down into the categories you can see in the chart above. There has been particular focus on sectors this year, because there has been so much bifurcation (fancy term alert!); meaning that some sectors (Technology) have significantly outperformed others (Energy). As of this writing, the overall index is up 12.26% for the year, but Technology is up 33.49% and Energy remains down 39.86%.
Returns YTD (Sector SPDR ETFs)
| S&P 500 Index | +12.26% | ||
| Communication Services XLC | +20.31% | ||
| Consumer Discretionary XLY | +23.95% | ||
| Consumer Staples XLP | +8.21% | ||
| Energy XLE | -39.86% | ||
| Financials XLF | -10.23% | ||
| Health Care XLV | +9.89% | ||
| Industrials XLI | +7.83% | ||
| Materials XLB | +14.57% | ||
| Real Estate XLRE | -2.38% | ||
| Technology XLK | +33.49% | ||
| Utilities XLU | +3.31% |
Source: sectorspdr.com
I believe the lesson here is that having a concentration in one sector might work for a short period of time, but remaining spread out across multiple sectors of the market likely makes sense for the long term.
Speaking of being concentrated in one sector, I was forced into one sector (okay, section) of my home due to exposure to COVID. As is recommended, I isolated from my family, and while it was kind of fun for a day or so, I quickly realized that I did actually miss my wife and kids! 😊 Fortunately, technology (growth sector!) helped a lot. We were able to use our Echo Shows (video chat), so it was *almost* like we were in the same room.
I am happy to report that all remain happy and healthy! I hope you and yours are the same.
Nathan