The charts below show the relative strength of the ten S&P 500 sectors as well as the Dow Jones Transports relative to the S&P 500 over the last year. When the line is rising it indicates that the sector is outperforming the S&P 500, while a falling line indicates underperformance. We have also shaded each sector in red or green to indicate whether the sector has outperformed (green) or underperformed (red) the S&P 500 over the last year.
As shown in the chart, six sectors have outperformed the S&P 500 over the last year. For much of the last year, the Consumer Discretionary sector was leading the market with steady outperformance. Over the last two months, however, the sector has run into headwinds and has seen its relative strength weaken considerably. Sectors that are still seeing positive momentum in their relative strength include Consumer Staples, Health Care, Telecom Services, and Utilities. Given the fact that all of these sectors are defensive in nature shows that investors are in no mood to take risk.
On the other side of the spectrum, sectors that have underperformed the S&P 500 over the last year are mostly cyclical in nature (Energy, Financials, Industrials, Materials, and Transports), once again illustrating the risk averse nature of investors. One potential bright spot in the group of underperforming sectors is Energy. As shown in its chart, while the sector is still underperforming by a wide margin, we have seen some steady improvement in the sector's performance beginning shortly after the Consumer Discretionary sector peaked.
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