Equity Strategies Group-Level Analysis Of The Equity Markets
Industries propelling performance have been diverse; the top-five groups are from five different sectors. Commodity-oriented, retail, and financial groups have been the primary drivers. The Leuthold Select Industries equity strategy, which chooses its thematic investments from the GS Score’s Attractive range, is up 20.2% YTD through September.
Financials, Information Technology, Health Care, and Consumer Discretionary occupy 19 of the 24 seats in the Attractive range at present. Cyclical groups have ranked well since last fall and continue to do so, while Growth-oriented themes have also recently made a comeback—with Health Care returning to the top five of our sector ranks back in August.
If there are shortages, bottlenecks, and commodity inflation everywhere, why is the rating for the Materials sector so uninspiring? Although valuations are compelling for Materials groups, the overall decline in the rankings can be traced to EPS revisions and macro influences, like the U.S. dollar and low rates.
Financials, Information Technology, and Consumer Discretionary remain at the top of our sector scores. Health Care advanced up to 4th from 6th. Communication Services and Materials both dropped one spot moving to 5th and 6th, respectively. Real Estate, Energy, and Utilities are the three-worst rated, which has been the case for over a year.
Market environments are driven not just by industry preferences, but also by a bias toward the very largest companies. We have developed a new set of groups composed of the 10 largest companies from each sector. With several of these baskets sporting positive rankings, we felt a closer look was in order.
Financials and Consumer Discretionary remain at the top of our sector rankings. Materials dropped out of the top three to 5th, along with Industrials moving from 4th to 7th. Information Technology and Communication Services moved in tandem to the 3rd and 4th spots, from 5th and 6th, respectively. Energy, Real Estate, and Utilities are the three-worst rated, which has been the case for over a year.
Financials, Consumer Discretionary, and Materials remain as the top-three sectors. Consumer Staples dropped for the second consecutive month, now rated 8th out of the eleven broad sectors; Health Care bumped up to 7th from 8th. Energy, Real Estate, and Utilities are the three-worst rated, which has been the case for over a year.
Financials, Materials, and Consumer Discretionary maintained their positions as the top three sectors. Industrials improved from 7th to 4th place, ousting Info Tech down to #5. Consumer Staples dropped two spots to rank 7th out of the eleven broad sectors. Health Care kept its place at #8, while Energy, Real Estate, and Utilities maintain their one-plus-year reign as the three worst.
Financials remains at the top, and Materials strengthened to #2 (it ranked #6 as recently as March). Consumer Discretionary moved back up to 3rd place. Info Tech dropped to 4th—the first time it has ranked below the top-three since October 2019. Health Care continued its trend of deterioration and is now the eighth-lowest-rated of the eleven broad sectors. Energy, Real Estate, and Utilities are the three-worst-ranked sectors—a distinction they have now maintained for roughly a year.
Historically, companies that have grown their equity share base over the previous year are apt to underperform the broad market in the ensuing months; those that had reduced shares outstanding tend to outperform. However, the opposite happened over the course of the last year. Here we explore the underlying details to see what contributed to this result.
Financials and Information Technology remained in the top-two spots this month, with Materials moving up from 6th to displace Consumer Discretionary as the 3rd highest rated. Health Care logged the biggest drop in the ratings, moving from 4th down to 7th. Energy, Real Estate, and Utilities maintained their status quo as the three-worst-ranked sectors—now approaching almost a full year at the bottom.
The top-rated sectors are unchanged this month, with Financials, Information Technology, and Consumer Discretionary rounding out the top-three spots. Health Care moved up from the 6th rank to 4th. Consumer Staples logged the biggest drop in the ratings, moving from 5th spot to 7th this month. Energy, Real Estate, and Utilities maintained their status quo as the three-worst-ranked sectors—now tallying the tenth-consecutive month at the bottom.
Financials jumped from 5th place to 1st this month—the first time Financials has been the highest-rated since February 2020. Information Technology, Consumer Discretionary, and Communication Services round out the top.