Sector Performance for April 2009

May 2, 2009: 10:36 PM CST

Which specific sectors fared the best and worst for the month of April?  Let’s take a look both at Absolute Sector returns and Relative Sector returns for the month of April 2009.

First, Absolute Returns for the 9 major sectors (and the S&P 500):

The S&P gained just over 8% for April – a relatively high return for a single month.  The best performing sector – a market leader – was the Financials (up 17.5%) followed closely by the Consumer Discretionary (retail) which was up almost 16% for the month.  If there is to be a bull market, it will begin with strength in these two sectors as we’re seeing now.

Part of Sector Rotation Analysis is to show us which sectors are outperforming the broader market and what that says about fund managers’ optimism and positioning going forward – for now, we must take this as an overwhelmingly bullish sign.

Health Care was the only (slightly) negative sector, though traditionally ‘defensive’ sectors such as Consumer Staples and Utilities also lagged the broader market – a further sign of bullishness as fund managers are seeking alpha (returns) through aggressive positioning (buying) and appear to be loosening up their hedges.

Let’s step from the Absolute returns above to the Relative Performance (related to the S&P 500).

Finally, Sector Performance Relative to the S&P 500:

The percentages you see are reflective by what percent a given sector outperformed or underperformed the S&P 500 (again, up 8%).  Again, the strength comes from the ‘risk-seeking’ or ‘aggressive/offensive’ sectors while under-performance stemmed from the three mainly ‘defensive’ or ‘risk-avoidance’ sectors.

This is a clear reversal from the prior Sector Rotation patterns, and could be in part a result of large funds unwinding hedges to an extent.  Again, if we are to see any sort of bull market beginning, this is what it would look like (or what we would expect to see).

Corey Rosenbloom, CMT
Afraid to Trade.com

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2 Comments

2 Responses to “Sector Performance for April 2009”

  1. Kevin Says:

    What would this mean we should expect from the sectors if this all turns out to be a bear market rally, that and soon?

    I read somewhere the comment, “the sector that led the last bull market will not lead the next one.” (Referring, I was given to understand, to financials.) What do you think?

  2. Corey Rosenbloom Says:

    Kevin,

    I’ve heard various interpretations on that theme – namely that the sectors that have been beaten down the most will be the quickest to recover (that’s perhaps what we’re seeing here). Bottom-fishers, value players, etc.

    With the Financial sector taken down so much, it’s perhaps unlikely to be a leader just like Technology was taken down so much after the 2000 ‘tech bubble’ burst.

    We’ll have to keep watching closely, though the traditional Sector Rotation model would forecast a picture like this to underscore the beginnings of a bull market.