Equity Strategies Group-Level Analysis Of The Equity Markets
Leuthold’s Industry Group “Dreams” And “Nightmares”— Annual Update
We take a look at our historical analysis of industry-group portfolios to see how the “Dreams” and “Nightmares” from 2020 fared in 2021. The industry composition of the 2021 Dream and Nightmare portfolios is also presented.
Sector Rankings
Financials, Information Technology, and Energy continue to round out the top of our sector scores. Communication Services advanced from 10th to 7th. Real Estate made the largest drop as it moved from the 6th ranking to the worst-rated sector at 11th. Holding steady in the 4th and 8th spots are Health Care and Consumer Discretionary, respectively. Joining Real Estate among the bottom-three ranks are Industrials and Utilities.
Financials Strength Endures At Top Of GS Scores
Financials has occupied the #1 overall ranking for all of 2021, thus far, but its absolute score has increased throughout the year due to well-rounded strength across the factor spectrum, reaching levels not seen in more than twenty years.
Sector Rankings
Financials, Energy, and Information Technology remain at the top of our sector scores. Materials advanced up to 5th from 8th. Consumer Discretionary made the largest drop as it moved from 4th down to 8th. Communication Services joins Industrials and Utilities to round out the bottom three worst-rated sectors.
Energy Makes Its Move
After years of languishing in the rock bottom of Group Selection Scores and sector rankings, Energy exploded higher this month, jumping from 10th lowest (out of eleven broad sectors) to 3rd highest in our composite rankings.
Sector Rankings
Three groups bumped up to Attractive this month, Insurance Brokers, Thrifts & Mortgage Finance, and Oil & Gas Exploration & Production.
GS Scores Successfully Navigate Choppy 2021
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.
Sector Rankings
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.
Digging Into Materials
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.
Sector Rankings
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.
Big Time
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.
Sector Rankings
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.
Automotive Retail: Attractive Amidst Industry Recovery
Automotive Retail currently ranks Attractive per our Group Selection Scores. This group offers a range of exposure to a bumpy—but recovering—U.S.-auto industry made up of car dealerships and auto parts & service retailers.
Sector Rankings
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 Sector Ranks #1 In GS Scores
Impressive strength across the factor spectrum implies that the recent pop in the long-time beaten-down Financials sector should have more room to run. We highlight five attractively-rated Financials groups for investment ideas beyond the popular big-bank-concentrated Financial sector ETFs.
Sector Rankings
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.
GS Scores Identify Successful Equity Themes In 2021
The Group Selection (GS) Scores are off to a fantastic start in 2021, and the Select Industries strategy, which takes its cues from the Attractive range, has taken full advantage.
Housing-Related Groups Top The Rankings
Housing-related groups have catapulted to the very top of our rankings. Several of these are among the top-ten performers of our 120-group universe. Despite the strong returns for these industries, our GS Scores indicate that this theme has even more room to run.
Sector Rankings
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.
“Change In Equity Shares Outstanding Factor” Surprises In 2020
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.