About That “Great” Sector Rotation

One of the common themes being used to justify this recent leg up in US Stock Market averages has been a “healthy” sector rotation. I’m not really sure where this comes from or who made that up. But it’s just not true. In fact, the math says that money has been flowing aggressively into Consumer Staples and out of the ever-so-important Financial sector.

This chart shows the relative performance of each of the S&P Sectors over the past month. Notice the financials all the way on the right and staples in the middle dominating the money flow.

11-7-13 sector rotation

Another one that stands out to me here is the relative weakness out of the Materials space. That’s another sector that’s been getting some positive attention. But not only have materials been relatively week over the past month, but continue to be in a multi-year downtrend relative to the S&P500.

11-7-13 xlb vs spyFinancials peaked on a relative basis back in July and closed Wednesday at 7-month lows:

11-7-13 xlf vs spy

So you tell me. Is this “healthy” sector rotation?



Tags: $XLF $XLB $XLP