Equity Strategies Group-Level Analysis Of The Equity Markets
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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).
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.