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Should investors switch to an underperforming sector?
(Note: companies that
could be impacted by the content of this article are listed at the base of the
story [desktop version]. This article uses third-party references to provide a
bullish, bearish, and balanced point of view; sources are listed after the
Balanced section.)
It’s been a good run for growth sectors and indicators remain favorable, but things can change quickly.
2019 was another good year for the stock market with most major indices (DJIA, SP500, Russell 2000) up 25-30% entering the last week of the year. Almost all market subsectors reported strong results in response to continued economic strength, lower interest rates, and a lessoning of trade tension. However, looking at the performance by subsector, there was one clear winner (technology stocks) and one clear loser (energy).
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Technology Select Sector SPDR Fund (XLK): |
Up 49.8% |
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Financial Select Sector SPDR Fund (XLF): |
Up 30.7% |
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Communication Service Select Sector SPDR Fund (XLC): |
Up 29.8% |
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Industrial Select Sector SPDR Fund (XLI): |
Up 28.3% |
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Consumer Discretionary Select Sector SPDR Fund (XLY): |
Up 28.0% |
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Utilities Select Sector SPDR Fund (XLU): |
Up 22.5% |
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Health Care Select Sector SPDR Fund (XLV): |
Up 20.6% |
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Energy Select Sector SOPDR Fund (XLE): |
Up 6.6% |
As investors turn their attention to 2020, one question remains – will the hot sectors of 2019 continue their dominance (Bull) or is it time for the underperformers to have their day in the sun (Bear).