Economically Sensitive Stock Market Sectors Lead Performance

A look at S&P 500 Index sector returns after the market close on Thursday shows since the March 23, 2020 low, energy is the top performing sector up 117.6% and followed by materials and financials. The industrial and technology sectors round out the top five performing sectors as seen below.

On a year to date basis, again, energy is the top performing sector up 31.7% followed by financials, communication services, industrials and materials. These top performing sectors since 3/23/2020 and year to date are economically sensitive or cyclically oriented ones suggesting investors may view the companies in the economically sensitive sectors more favorably. Year to date, technology continues to slip in performance and is now negative for the year down .7%.

Finally, the below chart shows shows the Citigroup Economic Surprise Indices for several regions around the world. Readings above zero indicate the data is being reported better than the expected. All four of the regains shown are indicating a large amount of the economic data is surprising to the upside.

In conclusion, based on the first two sector performance charts, returns have been strong from the March 2020 low as well as this year. The economic data also supports a strengthen economic environment. A market pullback would not be a surprise and would certainly be healthy; however, if many are waiting for a pullback, it could come from a higher price level.