Sector Ratings and Model Portfolio Update
It's still a risk-on environment, but leadership over the last month has shifted quite a bit. No longer is this a market where returns are dominated by a handful of mega cap growth names. The value-oriented areas of the market are helping to drive us higher, too.
Check out this year’s sector performance derby. The growth-oriented Communication Services and Information Technology sectors are sitting in the #1 and #3 spots, respectively after finishing at the top of the scorecard in 2023. But unlike 2023, Energy, Financials, and Industrials are all outperforming the benchmark index as well.
We’re living in a different world than we were a year ago, one where leadership and participation in the bull market is much broader. One thing hasn’t changed, though: risk-off sectors are still lagging. The Real Estate, Utilities, and Consumer Staples sectors are each trailing the overall S&P 500 by half in 2024, and despite being a leader through the first two months of the year, Health Care has slipped behind, too.
That’s a good thing for stock market bulls. Risk-off areas should lag in healthy bull markets. That’s evidence of risk-appetite among investors, and risk appetite is what drives bull markets higher.
If the Consumer Staples weren’t breaking below their 2021 lows relative to the S&P 500 and instead were outperforming, that would be evidence that something was amiss. But that’s not what we’re seeing. The Staples/SPX ratio just hit its lowest level in more than 20 years.
Keep reading with a 7-day free trial
Subscribe to Grindstone Intelligence to keep reading this post and get 7 days of free access to the full post archives.