Equity Strategies Group-Level Analysis Of The Equity Markets
S&P 500 Sector Leaders Since Market Top
Since the market peak on February 19th the S&P 500 Health Care sector is down only 1.1%. Among the S&P 500 sector indexes, Health Care and Consumer Discretionary are the performance leaders.
Pockets Of Strength Among Discretionary Industries
A brief overview of two (very different) Attractively-rated Discretionary groups that are longstanding SI portfolio holdings that have managed to maintain their “Attractiveness” throughout the tumult.
Sector Rankings
For the third consecutive month, Health Care, Communication Services, and Information Technology remain the top-three rated sectors (out of eleven total). Materials moved up to 7th place from 9th, while Utilities declined from 8th place to last, with Real Estate and Energy the next lowest rated.
Robust Health Care Leads Since Market Peak
Health Care has been the best performing sector following mid-February’s market peak. Its robust relative performance during this bear market isn’t terribly surprising given the sector’s defensive qualities, but it has impressively outpaced other safe haven areas.
Sector Rankings
For the second consecutive month, Health Care, Communication Services, and Information Technology remain the top-three rated sectors. Consumer Discretionary and Financials swapped spots and are ranked 4th and 5th, respectively. Real Estate joined Materials and Energy to rank at the bottom.
Popular Low/Minimum Volatility Strategies Disappoint
During the peak-to-trough market drawdown through mid-March, some of the most popular Low/Min Vol ETFs did not perform as anticipated. Stable and boring businesses, that weather downturns relatively well, are facing atypical vulnerabilities.
Sector Rankings
For the third consecutive month, Health Care and Information Technology remain among the top three rated sectors. Financials dropped from second to fourth and Communication Services took its spot as #2 (up from 5th). Consumer Staples has improved to 6th from the 8th position. Utilities, Materials, and Energy continue to rank at the bottom.
Group Ideas For Tumultuous Times
The economic outlook has turned increasingly cautionary, investors are on edge, and the search for yield persists. Because the typical defensive/high-yielding plays are generally both expensive and unappealing in our group work, we highlight several less conventional groups that may be poised to outperform.
Sector Rankings
For the second consecutive month, the top-three rated sectors are Health Care, Financials, and Information Technology. Real Estate has improved to 6th from the 8th lowest and is now more attractive than Industrials and Consumer Staples sectors. Utilities and Energy have ranked among the three-lowest rated positions for twelve consecutive months; they are joined by Materials—which has ranked among the bottom-four spots for twelve months running.
Stocks And The U.S. Presidential Election Cycle
Our equity research typically focuses at the sector and industry group levels, thus, in this analysis, we drill down and explore the presidential effect on a more granular level to see what interesting equity trends may have transpired in the past cycles.
Sector Rankings
The top-three rated sectors are Financials, Health Care, and Information Technology, the same as last month. Real Estate moved out of the bottom three rankings after a one-month stay and Materials edged back in following its one-month respite. Utilities and Energy round out the bottom, which have placed among the lowest rated now for eleven consecutive months.
Sector Rankings
The top-two rated sectors are Financials and Information Technology. Health Care advanced to rank #3, while Communication Services—among the top-three positions since July—was bumped down to #5. Real Estate, which ranked highly in the top three just six months ago, deteriorated to the 9th lowest (out of eleven broad sectors). Materials edged out of the bottom three ranks after nine consecutive months, while Utilities and Energy have now been among the bottom three positions for ten months in a row.
Industry Returns: The Decade’s Winners & Losers
This “decade in review” edition examines the performance of sectors and industries, looking at the best and worst groups to reveal the stories they have to tell.
Seeing Construction Materials’ True Colors
Construction Materials moved to an Attractive rating, fueled by growth and price momentum. Surprisingly, digging into the numbers revealed it to have lower beta dynamics. Based on this, we examined the cyclical nature of the group to better understand the impact it may have on overall portfolio cyclicality.
Sector Rankings
The top-three-rated sectors are Information Technology, Financials, and Communication Services. Health Care rose from sixth of eleven to the fourth-highest-rated. This is the ninth consecutive month in which Utilities, Materials, and Energy have governed the bottom three positions. The Consumer Staples sector has been occupying the #8 spot since at least July.
Utilities' Valuation Millstone
Even though the S&P 500 roared ahead by nearly 50% over the last three years, the traditionally low beta slow-growth Utilities sector outperformed during that powerful upswing. Nevertheless, today Utilities seldom look attractive by active managers and calls to overweight the sector are scarce.
Sector Rankings
The top-three-rated sectors are Communication Services, Information Technology, and Consumer Discretionary. Financials dropped from the second-highest-rated to #4 (it ranked in 9th place out of the eleven sectors last March); it has now placed among the top four since May. This is the eighth consecutive month in which Utilities, Materials, and Energy have dominated the bottom three positions.
Industry Groups Topping The Charts In 2019
The groups we examine here are particularly interesting because they are a diversified mix across sectors with varying macro-factor relationships and risk profiles. They have scored well for a long period of time and have been long-term positions in our SI portfolio.
Sector Rankings
The top-three-rated sectors are Communication Services, Consumer Discretionary, and Financials. As recently as March, Financials ranked in 9th place out of 11 sectors; it has now placed among the top four since May.
Fresh Look At The Education Services Group
We take a look at the group’s constituent transformation, its robust GS Score, political/regulatory tailwinds, and its ability to withstand and hold up well during market downturns and recessions.
Sector Rankings
The top-three-rated sectors are Communication Services, Consumer Discretionary, and Financials. As recently as March, Financials ranked in 9th place out of 11 sectors; it has now placed among the top four since May. Info Tech dropped from the #1 spot to #4 in the latest calculation. For six consecutive months now, the three lowest-ranked sectors are Utilities, Materials, and Energy.
Internet Retail: Beyond Amazon
Amazon has become synonymous with the Internet Retail industry, however, this group is comprised of a diverse mix of companies ranging across the market spectrum, and strength is being exhibited throughout the group.
Sector Rankings; Attractive & Unattractively-Rated Industry Groups
The top-three-rated sectors are Communication Services, Information Technology, and Financials. As recently as March, Financials ranked in 9th place out of 11 sectors; it has now placed among the top four since May. Real Estate dropped out of the top three after a two-month visit and is situated in 5th place this round. For the fifth consecutive month, the three lowest-ranked sectors are Utilities, Materials, and Energy.
Financials Strengthen Among GS Scores; Specialized Finance Purchased
The Financials’ Group Selection (GS) Score sector-composite rating has incrementally improved over the past five months, rising to rank #2 out of 11 sectors in late June.
Sector Rankings
The top-three-rated sectors are Communication Services, Financials, and Real Estate.
Homebuilding Stocks Take Flight
Homebuilding rose to rank #1 among our universe in our latest monthly Group Selection (GS) Scores. The industry has staged an impressive turnaround, beginning in October 2018, with strong returns outpacing the S&P 500 by more than 2.5x YTD.
Sector Rankings
The top-three-rated sectors are Information Technology, Real Estate, and Financials.
Information Technology Sector Now Highest Rated
For the first time since late 2017, Information Technology moved into the top-rated spot. This sector has historically produced especially strong results during periods after which it took over the #1 seat.
Sector Rankings
The top-three rated sectors are Information Technology, Communication Services, and Consumer Discretionary.
Movies & Entertainment & Broadcasting Revisited
Performance has been robust for this group, rising on a relative strength basis since the end of 2017. Its diverse mix of constituents equates to a group that, overall, is middle-of-road in terms of beta and volatility relative to other industries. These dynamics have contributed to its solid relative returns across diverging market environments of late.
Sector Rankings
The top-three rated sectors are Communication Services, Health Care, and Information Technology. Scoring at the bottom of the ranks are Energy, Materials, and Utilities. Financials improved from ninth place to sixth, springing ahead of the Industrials and Consumer Staples sectors.
Beta & Volatility On The Move
We explore these factors’ behaviors from the stance of our proprietary equity group universe and present industry ideas—across sectors—that fit each of these investment viewpoints. The intent is to offer new investment ideas from a different analysis perspective.
Sector Rankings
The top-three rated sectors are Health Care, Communication Services, and Consumer Discretionary. Scoring lowest in the latest rankings are Energy, Materials, and Financials.
Airlines Travel To Attractive In The GS Scores
We look at our domestic Airlines’ GS Score and examine the historical relationship between oil prices and Airline stocks. Additionally, we explore several other data sets to determine where the industry’s supply/demand picture stands heading into 2019.
Sector Rankings
The top-three rated sectors are Communication Services, Health Care, and Consumer Discretionary. Scoring lowest with the latest ratings were Materials, Energy, and Industrials.
Sector Rankings
The top-three rated sectors are Health Care, Communication Services, and Consumer Discretionary, with Information Technology dropping from the top-three. Rounding out the bottom end of the rankings, for the second consecutive month, are Materials, Energy, and Consumer Staples.
Housing Affordability & Homebuilding Stocks
The Homebuilding stocks represent another Consumer Discretionary group ranking Attractive via our GS Scores; we have held the Homebuilding group for the last year and a half. Homebuilders is an extremely rate-conscious industry group given mortgage rates’ impact on housing affordability (and thus, demand).
Restaurants Group Dishes Up Defense
The Restaurants industry is another Consumer Discretionary group ranking Attractive via our GS Scores; we purchased it in the Select Industries (SI) portfolio in November. This group has exhibited defensive qualities of late.
Sector Rankings
For the sixth consecutive month, the top-three rated sectors are Health Care, Consumer Discretionary, and Info Tech. Rounding out the bottom end of the rankings are Materials, Energy, and Consumer Staples.
Brick & Mortar Retail Evades October Sell-Off
Although Discretionary stocks broadly underperformed during October’s market decline, prominent amongst the very top industry group performers was a rather unexpected genre of industries—brick & mortar retail. Not only did this cohort hold up during October’s tumult, but many of the underlying stocks have been posting strong returns all year.