via MarketWatch:
- The stock market sectors that typically shine during the last months of a bull market are doing quite well these days, thank you. And at least some of the sectors that typically do poorly in such months are struggling.
- The researchers focused on performance over the last three months of each bull market in the U.S. stock market since the early 1970s. During each of these periods, they measured the performance of the 11 sectors within the S&P 500 index.
- Their finding: “Financials and Utilities have tended to underperform in the months leading up to bull market peaks, while Consumer Discretionary and Consumer Staples have outperformed.”
- How do the last few months stack up against these historical precedents? Unfortunately, in 3 out of these 4 cases, the sectors’ recent performance is consistent with a top being formed.
SPDR Health Care (XLV)
| Company name | % Net assets |
|---|---|
| Johnson & Johnson | 12.82% |
| Pfizer Inc. | 11.95% |
| Merck & Co, Inc. | 7.91% |
| Abbott Laboratories | 4.87% |
| Unitedhealth Group, Inc. | 3.87% |
| Amgen, Inc. | 3.78% |
| Bristol-Myers Squibb Company | 3.43% |
| Medtronic, Inc. | 3.20% |
| Eli Lilly and Company | 2.69% |
| Baxter International Inc. | 2.39% |
| Percentage of holdings 56.91% | |
SPDR Consumer Staples (XLP) (consumer non-discretionary)
| Company name | % Net assets |
|---|---|
| Procter & Gamble Company | 14.41% |
| Philip Morris International, Inc. | 9.90% |
| Wal-Mart Stores, Inc. | 8.54% |
| Coca-Cola Company | 7.19% |
| Kraft Foods, Inc. | 4.66% |
| Altria Group Inc. | 4.45% |
| CVS Caremark Corp | 4.40% |
| PepsiCo, Inc. | 4.35% |
| Colgate-Palmolive Company | 3.61% |
| Walgreen Company | 3.31% |
| Percentage of holdings 64.82% | |
SPDR Utilities (XLU)
My thoughts: It is interesting that these names have been outperforming since March/April. I believe fund managers are rotating into these safe sectors for capital preservation. Most of the leaders in the stock market since September/November 2010 have been getting beaten down very hard, look at SLV (silver ETF).
The Fed’s Treasury program is coming to an end in June, which historically means that risk assets will fall soon after that occurs. (look back at the QE 1 & 2 in Japan’s history) But I am a firm believer that this is the most dovish (opposite of hawkish) Fed in history and they will have as many QEs as there are sequels to the movie SAW and every single one will be more distasteful than the last.
In other news events, that may or may not put a bottom in this leg down in the market, (haha, can i even call it that – a leg down). Anyways, we have accelerating negative news about the European sovereign debt crisis, and about the United States debt ceiling. The question always is, IS THIS PRICED IN? We will find out in the next few weeks.
Now on to Financials, which have been underperforming. If the Fed keeps printing there is something certain coming down the road. Ready? Ready. INFLATION, and the type of inflation that will make you and every one around you a millionaire! Banks don’t do well in inflationary environments, especially when inflation is as massive as I think it will be. You know what else hinders growth in banking operations? REGULATION. So banks have both inflation and regulation down the road…
… And we’re open!
