A Snapshot Of The Top Performing S&P 500 Sector Indices Over Time
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View from the Observation Deck 

  1. The first thing that pops out to us looking at the chart is the sheer number of defensive sectors that posted the highest total returns in the 16 respective periods.
  2. Of the 16 periods featured in the chart, 13 of the sector indices that performed best, or 81.25%, are considered defensive in nature. They are Telecommunication Services, Consumer Staples, Health Care and Utilities.
  3. The second thing that caught our attention was the strong showing by consumer-oriented stocks. The S&P 500 Consumer Staples and S&P 500 Consumer Discretionary Indices performed best in 9 of the 16 periods, or 56.25%.
  4. One of our takeaways from this snapshot is that investors who are apprehensive about committing capital to the stock market do have the potential to capture capital appreciation, while seeking to mitigate risk over time.
  5. A second takeaway may have something to do with investors' desire for current income due to the plunge in interest rates since the start of the new millennium, in our opinion. Some defensive sectors, such as Utilities and Telecom. Services, have historically offered attractive dividend yield levels relative to the broader stock market (S&P 500 Index).
  6. Lastly, the pace of economic growth in the U.S. has slowed. From 2000-2015, real GDP growth averaged 1.9% at annualized rate, down from an average of 3.6% over the previous 15 years (1984-1999), according to data from the Bureau of Economic Analysis.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is a capitalization-weighted index comprised of 500 stocks used to measure large-cap U.S. stock market performance, while the 10 major 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, March 3, 2016 @ 1:22 PM

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.