Tuesday, April 30, 2013

What sector has performed the best since March 2009?

A classic case of truth is stranger than fiction. 

Source: Stockcharts.com

Needless to say, heading into 2009, as the market was reeling and the world was coming to an end, what was clear was 1) financial stocks were decimated, with many facing extinguishment, and 2) the consumer was likewise crushed, facing years of deleveraging and severely reduced spending. That said one would've understandably believed at the time that those stocks would be must-avoids as they would very likely underperform the market for years to come.

Wrong! Since March 2009, the best performing sector has been Consumer Discretionary, and the next best relative performer has been Financials.

As always, I'm sure there are many good reasons for why this has been the case (Fed policy, unprecedented valuations, etc.). However, for me it's just another example of the old saying that the stock market will do whatever it takes to prove the most people wrong. If it was that easy to surmise a no-brainer strategy based on the past, everyone would be a Warren Buffett. And in my experience, anything that appears to be a no-brainer when it comes to allocating one's funds should be re-evaluated, more than once. Nothing comes easy in this business and all too often the seemingly "No Duh!" investment decision is a setup for future losses.

8 comments:

  1. Paradoxically the longer term underperformance of utilities should put paid to the currently fashionable notion that utilities are in a bubble. Utilities tend to outperform the market in later stages of a recovery, especially when interest rates rise. I think people will be shocked by how much more the utes can rally from here, and it has nothing to do with being "defensive."

    ReplyDelete
    Replies
    1. I too share that view on Utilities -- I think the trouble comes from other defensive stocks (consumer staples, healthcare) are experiencing the same rally, while cyclicals have lost their momentum.

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