Sector Returns off March 2009 Lows to August

Let’s step back our perspective to take a look at the absolute performance of the main AMEX Sector SPDRs from the March 2009 lows to the end of August 2009.  There is a shocking result!

We knew that the financials – which had suffered the worst through most of 2008 – would likely recover strongly during any market recovery, but it’s shocking to see that the XLF (Financial ETF) has risen over 140% since the lows of March 2009!

You can see the performance of the other sectors above:

Offensive Sectors:

Financials:  (XLF):  +141%
Consumer Discretionary (XLY)  +64%
Technology:  (XLK):  +50%
Industrials:  (XLI):  +65%
Materials:   (XLB):  +65%
Energy:  (XLE):  +35%

Defensive Sectors:

Consumer Staples:  (XLV):  +26%
Health Care:  (XLV):  +30%
Utilities:  (XLU):  +29%

Beyond the obvious, it tells us that the offensive sectors turned out performance roughly twice those of the “defensive” or “conservative” or “risk-avoidant” sectors.

It can be helpful to divide the 9 major sectors into 6 “offensive” sectors that outperform when the market and economy are improving (or rallying) where you’ll get the best performance and the defensive sectors which outperform (though still may decline… just at a slower pace) that outperform during times of market downturns or uncertainty.

A rising tide lifts all ships, though some ships rise or fall faster than the tide – as seen by the Sector Rotation model.

Let’s watch this profile closely to detect any short-term shifts in the risk-seeking vs risk-avoidance theme of money managers and market participants.

Corey Rosenbloom, CMT
Afraid to Trade.com

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