The Only Constant Is Change

Bob Carey
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The Only Constant Is Change

Posted Under: Sectors

View from the Observation Deck

One of the most common questions we field on an ongoing basis is the following: What are your favorite sectors?
Sometimes the answer is more evident than at other times, in our opinion.
You didn't need much of a crystal ball to tout Information Technology in 1998 and 1999 (top-performing S&P 500 sector both years by a wide margin), as was the case with Energy in 2004 & 2005, according to performance data from Bloomberg.
From 2006-2019, however, no sector in the S&P 500 Index was able to repeat as the top-performer on a calendar year basis.
The three top-performing sectors in the chart for Q4'19 were as follows (total returns): 14.40% (Information Technology), 14.37% (Health Care) and 10.44% (Financials). They were the only sectors that surpassed the 9.06% total return posted by the S&P 500 Index. The other eight sectors generated total returns ranging from 8.99% (Communication Services) to -0.54% (Real Estate).
The three top-performing sectors for 2019 were as follows (total returns): 50.29% (Information Technology), 32.69% (Communication Services) and 32.09% (Financials), according to Bloomberg. They were the only sectors that surpassed the 31.48% total return posted by the S&P 500 Index. The other eight sectors generated total returns ranging from 29.32% (Industrials) to 11.81% (Energy).
Despite the strong showing, investors were net sellers of sector funds over the 12-month period ended December 2019. Sector Equity mutual funds and exchange-traded funds (ETFs) reported estimated net outflows totaling $31.36 billion (-$28.93 billion/Active vs. -$2.43 billion/Passive), according to Morningstar.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. Past performance is no guarantee of future results. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. The respective S&P 500 Sector Indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector.

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Posted on Thursday, January 16, 2020 @ 12:13 PM • Post Link

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These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.

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