Sunday, January 20, 2008

S&P 500 Sector Performance for 2008

Here we see the performance of nine S&P sectors so far in 2008, as measured by their ETFs: XLB (Materials); XLI (Industrials); XLY (Consumer Discretionary); XLP (Consumer Staples); XLV (Health Care); XLE (Energy); XLF (Financials); XLK (Technology); and XLU (Utilities).

Several themes stick out:

1) Negative Performance - All sectors are down on the year. My basket of 40 stocks drawn from the highly weighted stocks in the first eight sectors shows one stock in an uptrend, four neutral, and 35 in downtrends. This is an unusually weak reading and suggests broad selling that--at least in recent times--has led to at least a temporary bounce short-term.

2) Defensive Themes Outperforming Growth - The strongest sectors include Utilities, Health Care, and Consumer Staples, all of which are perceived as being more recession-resistant than Technology and Consumer Discretionary issues.

3) Financials Continue to Underperform - We've seen steps taken the Fed, by outside investors putting money into the banks, and by the government to stimulate the economy. So far, financials continue to deteriorate.

4) Weak Energy Stocks - Despite recent strength in the oil price, we're seeing surprising weakness in energy shares. The inflation theme may be losing out to the recession theme, which has implications for a variety of commodity prices.


My Prior Look at Technical Strength by Sectors