Sector Relative Strength

The charts below show sector relative strength versus the S&P 500.  In each chart, a rising line indicates that the sector is outperforming the S&P 500 while a declining line indicates underperformance.  We have also included dots showing each time the Fed has recently cut rates (red) or left them unchanged (blue).

There has recenty been a changing of the guard in terms of sectors leading the market.  The early stages of the rally in March were led by Consumer Discretionary, Financials, Industrials, and Technology.  In recent weeks, however, the pace of outperformance among many of these sectors has either slowed or completely vanished.  Financials have been underperforming the S&P 500 since September. 

In place of these sectors, new ones have emerged to lead the market.  Some of the sectors recently stepping up to lead are Health Care, Telecom Services, and Utilities.  While Health Care's resurgence is most likely attributable to the fading prospects for a 'public' option in any health care reform bill, the fact that the market's three most defensive sectors are leading implies that investors are at least temporarily taking a more conservative stance.

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Comments

[Financial Asset Management by]

The technology sector is a bet worth taking. Although risky at times, it is a sensible decision under the current market conditions.