The S&P 500 has rallied from the March lows and is now standing in positive territory for the year. But I wanted to take a look at how we arrived at this positive performance. In the chart below I have in the left column the 2009 return for the S&P 500, all 10 GICS sectors (using ETFs), and four other widely followed indexes. In the right column are the 2008 returns.
| 12/31/08 - 5/4/09 | | Last Year - 2008 |
S&P 500 | 1.58% | -37.03% | |
10 GICS Sectors | |||
Staples | -5.47% | -15.02% | |
Healthcare | -7% | -23.31% | |
Utilities | -6.20% | -28.93% | |
Financials | -5.32% | -54.97% | |
Discretionary | 11.55% | -32.97% | |
Technology | 16.10% | -41.51% | |
Materials | 20.26% | -44.05% | |
Industrials | -2.03% | -38.74% | |
Energy | 3.44% | -38.97% | |
Telecom | 11.10% | -42.04% | |
Other Indexes | |||
Russell 2000 | 3.11% | -34.15% | |
MSCI EAFE | -1.54% | -41.04% | |
Emerging Mkts | 24.55% | -48.88% | |
US REITS | -4.89% | -39.88% | |
In red I have identified the five worse performers for 2008, and their subsequent return year to date in 2009. You will notice the five worse performers (with the exception of Financials) are now the best performers this year. The current market rally seems to be made from oversold conditions on the hardest hit areas. Bear market rally proponents agree with this point, and further point to tricky accounting that are producing better earnings in these areas as reasons to be skeptical. They are waiting for a pull back or re-test of the March lows.
But, these five areas also share two important characteristics: they are high beta sectors that are generally characterized as early cyclicals (except telecom). I am encouraged by this sign of distinct leadership by historically early market leaders. And so are the bulls.
