Since the beginning of the most recent financial crisis, stocks have seen both extreme volatility outbursts and extremely low volatility periods. Amidst all of the turbulence, confusion and doom and doom headlines, for the average investor it was difficult to see where real opportunity lies. While hindsight is 20/20 it is none the less notable how well certain sectors of the S&P 500 have performed since the October 2007 top and how far below their all time highs others remain.
To analyze performance of the S&P 500 sectors from October 11 2007 (the date of the all time high on the S&P 500) to today October 16 2012, I used the Select Sector SPDR ETF series.
The illustration below is a simple price chart of the nine Select Sector SPDR ETFs as well as the S&P 500 represented by the SPY etf. The nitty gritty details of the chart are for now not important, my main take-away is that most of the sectors are clustered together and performance-wise are moving well towards or past their October 2007 levels. The one big exception here is the financial sector, which remains down about 55.00% from its October 2007 levels.
The second chart displays more of the same but now measures each sector’s percentage change from October 2007 to the present.
We note that the industrials, material, financials and utilities sectors remain below their October 2007 highs while the rest of the sectors have actually surpassed their October 2007 levels. The very best performance of the S&P 500 sectors came from the consumer staples group (XLP), which over the aforementioned time-frame is up an astonishing 27.84%. Who says you can’t make money in a bear market?
To make this all a little more visually pleasing, here is the leader-board of S&P 500 sector performance from October 11 2007 to today;
S&P 500 -7.80%
Consumer Staples +27.84%
Consumer Discretionary +23.50%
Healthcare + 12.80%
So there you have it, consumer staples came in first while financials are badly lagging.
Where do we go from here? Given the market structure and current environment remains very supportive of equity prices I favor a continued up-trend into year-end for now. The major toggle however would be a potential change in leadership at the federal reserve.
In terms of sector performance into year-end I am staying away from both of the outliers (consumer staples and financials) and favor buying the middle of the pack on the charts and leader-board above.