Sector Returns Year to Date

Mar 11, 2009: 1:21 PM CST

With the middle of March almost upon us, let’s take a look so far at the Sector Returns (AMEX Sector SPDRs) year to date to see what the Sector Rotation model might be telling us.

With little surprise, the Financials (XLF) grossly underperformed all other sectors year-to-date, losing 42% in just over a two-month period.  That is financial devastation.

Strangely enough, the Industrials are showing the second worst performance (losing 30%).

The Utilities, Consumer Discretionary, and the S&P 500 index itself came in next with a loss 20%.

Technically – for trivia buffs – the 20% decline in the S&P 500 year-to-date represents a full-bear market (historians often classify bear markets as a peak-to-trough decline of 20% in a major index).  That’s by no means encouraging, however.

Enough with the bad news.  Which sectors ‘held their own?’

As expected, it was the traditionally defensive sectors (Health Care and Consumer Staples), though they still lost money (they outperformed the S&P because they lost less money).

And another surprise emerged which is encouraging – the Technology Sector (XLK) was the #1 performer (relative) with a loss of “only” 9%.  This isn’t your expected type of behavior in a recessionary/bear market so that’s a sign of life.  It doesn’t mean they’re going to make you money if you buy them, but to see relative strength in technology traditionally is a good sign – but don’t read too much into that yet.

Unless you’re shorting, the only way most investors make money is when a sector (or stock) actually appreciates in value, rather than showing “Relative Strength” to a declining S&P 500.

Corey Rosenbloom
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