Sector Rotation and Performance in January

Feb 4, 2009: 3:31 PM CST

January did not get 2009 off to a great start.  Let’s break down the S&P 500’s 10% loss by sector and see what clues the Sector Rotation performance in January might be offering us.

Sector Rotation (AMEX Sectors) absolute performance in January:

Sector Perf

We’re seeing a negative picture across the board – not one major Sector increased in value in January.  Financials lost almost 30% while the ‘best’ performer was the Utilities which managed only to lose 2%.  We saw the biggest hits in the two key sectors that will be critical for any sort of recovery – Financials and Consumer Discretionary/Retail.  I cannot underscore how bad a sign this is for the broader market.  We actually saw Industrials underperform Consumer Discretionary which adds to the negativity.

The “Defensive” sectors held up the best in terms of Health Care, Utilities and – to an extent – Consumer Staples (which lost almost 10%).  This is absolutely the opposite picture you’d want to see to be bullish.

Let’s switch from absolute returns to performance relative to the S&P 500.

Sector Rotation (AMEX Sectors) Relative performance in January:

Relative performance

Again, the Sectors that outperformed the S&P 500 by the largest margin were the “Defensive” sectors of Health Care and Utilities.  Surprisingly, Technology and Energy outperformed the S&P 500 but by only 4%.

The Financial Sector underperformed by 15% – a devastating development.  Check out some stocks such as Regions Financial (RF) which notched a negative close almost every single day in January (falling from $9 to $3 per share in a single month).

Keep watching Sector Performance, as it should give us clues to where we are and where we’re likely to be headed.  Look for any signs of strength in Financials and Consumer Discretionary.  Until then, talk of the word “Bottom” is premature.

For now, I can see no hope for the bulls with these results.

Corey Rosenbloom
Afraid to Trade.com

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