Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Chinese Tech Stocks CCP Paranoia and Best AI Tech Stocks ETF - 26th Oct 21
Food Prices & Farm Inputs Getting Hard to Stomach - 26th Oct 21
Has Zillow’s Collapse Signaled A Warning For The Capital Markets? - 26th Oct 21
Dave Antrobus Welcomes Caribou to Award-Winning Group Inc & Co - 26th Oct 21
Stock Market New Intermediate uptrend - 26th Oct 21
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Sector Performance Analysis During the Stock Market Rally

Stock-Markets / Sector Analysis Jul 28, 2009 - 11:05 AM GMT

By: Money_and_Markets

Stock-Markets

Best Financial Markets Analysis ArticleNilus Mattive writes: I spend a lot of time crunching data, reading third-party research, and studying market history. And one of my favorite things to watch is the relative performance of the individual market sectors.

Today, I’m going to give you the latest numbers on these important market groups, along with some additional thoughts about second-quarter earnings.


But first, I want to clarify exactly what I mean by “sector” …

If you ask most investors — even many professionals — a stock sector is simply any group of companies that operate similar businesses.

In my book, that’s too broad a definition. Instead, I subscribe to the idea of the ten market sectors as they’re treated in major indexes such as the S&P 500.

These ten sectors are part of the official Global Industry Classification Standard (GICS). The breakdown is as follows:

#1. Energy — Pretty self-explanatory, but these companies include the major integrated oil companies, drillers, etc. Note, however, that it does NOT include …

#2. Utilities — These are the firms that provide us with basic services like electricity, water, and gas. Many are regulated by the government, though deregulation and consolidation has become a growing trend.

#3. Financials — Everyone from banks to brokerages to insurance firms. You’ve heard a lot about these guys lately!

#4. Consumer Discretionary The companies that provide things we can generally afford NOT to buy — fast food companies, clothiers, and most other retailers (which I covered in depth two weeks ago).

#5. Consumer Staples — In contrast to the discretionary firms, these companies sell the things we do buy through thick and thin … household products, packaged foods, beverages, and yes, cigarettes.

#6. Health Care — Everybody from the major pharmaceutical firms to medical device makers to health plan providers go here.

#7. Information Technology — Computer makers, software providers, technology service providers, and so on.

#8. Telecommunication services — Whether they do traditional landline phone hookups or just cellular connections, they go here.

#9. Materials — These companies specialize in finding and working with metals, chemicals, timber, etc. Miners, refiners, and other natural resource companies fall into this category.

#10. Industrials — A pretty broad category that includes companies making heavy-duty equipment and other so-called capital goods, along with airlines, railroads, delivery and office services, etc.

Sure, there are other ways of breaking down the groups. And there is plenty of overlap and interconnection between these 10 sectors. But I still find GICS to be the best overall way of organizing the various stocks out there.

What about the different groups within the sectors? Those are individual industries!

Okay, So How Have the Various Sectors Been Acting Lately?

In recent columns, I’ve been voicing concern over consumer spending and how that will impact the overall economy and the more cyclical sectors such as consumer discretionary firms.

But if the recent market action is any indicator, most investors are simply NOT sharing my worry. Take a look …

Nilus Mattive

This chart shows the performance of each individual sector from July 10 through July 23. That about covers the recent stock rally, over which the S&P 500 index gained 11.1 percent.

As you can see, materials, consumer discretionary, and information technology were the three biggest winners.

Note that all three of these sectors are highly cyclical. In other words, they do well when the economy is strong and poorly when the economy is weak.

The fact that these three continue posting strong gains means investors are betting on a quick economic recovery.

But even if things are now less worse … and possibly even bottoming … is such an optimistic rotation into these riskier stocks warranted?

I’m not so sure.

Simply consider what we heard from Microsoft last Friday. The firm said profits sunk 29 percent in the second quarter of 2009 vs. the same period a year earlier.

And it wasn’t just one business unit dragging down results, either. According to the company’s Chief Financial Officer, Chris Liddell:

“We’re still in tough economic conditions and we don’t see that getting better in the near term.”

Now, there have certainly been some good earnings numbers coming out of other tech companies.

However, Microsoft deals with companies around the world. It sells products that are — at least for now — practically universal. And it’s saying things are bottoming, at best. Not improving.

So is the runup in cyclical shares warranted? More importantly, what happens if we just scrape along the economic bottom for a while?

In my opinion, the less cyclical sectors are still where the best values are in this market, especially once you factor in risk!

What about the financials?

As I said last week, I am looking past the supposed positive second-quarter earnings reports to bigger challenges ahead — including rising loan losses, less government support, and looming legislation that could hobble many firms going forward.

One last thing: Today’s analysis was only based on capital appreciation over a very short timeframe.

If you look at the longer horizon, the results look much different. And as I recently showed my Dividend Superstars subscribers, if you consider total returns — i.e. the effect of changing dividend policies — well, you get a completely different picture entirely!

Hey, if you believe this is it … and it’s all blue skies ahead, then by all means you should be allocating your stock portfolio into July’s big winners.

But if you’re more like me — a little skeptical that we’re going to see a rip-roaring U.S. economy right away — then you still might want to consider favoring the dividend-rich, less cyclical sectors for now.

Best wishes,

Nilus

P.S. If you’ve been thinking about subscribing to Dividend Superstars, I suggest you do so SOON. That’s because the special charter pricing of $39 a year is going away forever, starting September 1. Click here to sign up now, and lock-in the special charter price before it’s too late!

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Money and Markets Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in