From the desk of Steve Strazza @Sstrazza
For the week ended Friday, May 15, 2020:
Every weekend we publish performance tables for a variety of different asset classes and categories along with commentary on each.
This week’s main theme is that the strong continue to get stronger and vice versa, which we’ll highlight in our Industry and Sector ETF tables, below.
Notice how the top three performers this week also happen to be the only Industry ETFs that are positive over the trailing 3-month period?
Gold Miners (GDX), Biotech (IBB), and Internet (FDN) posting positive 3-month returns may not sound like much but is actually quite impressive as it means these areas have already taken out their highs from just before the broader market peaked and collapsed in February.
Click table to enlarge view.
Their strength stands in stark contrast to some of the more cyclical Industry ETFs such as Banks (KBE), Exploration & Production (XOP), and Aerospace & Defense (ITA), which are the three worst-performing groups over the trailing quarter, each lower by roughly -40%.
Now notice this week’s worst performers: it’s those same three ETFs by a long shot with both KBE and XOP posting hefty losses in excess of -10%. So not only are the strong getting stronger, but the weak are getting weaker.
This is a perfect illustration of the increasingly bifurcated market environment we’ve been writing about, as not only are this week’s leaders outperforming on an intermediate timeframe but Gold Miners and Biotech are also the best performers over the trailing year. Meanwhile, Banks and Aerospace & Defense are by far the worst performers over the past year with the exception of Exploration & Production of course.
This multi-pane chart is another way to visualize how these winners and losers’ paths continue to diverge over time.
Click chart to enlarge view.
While Internet and Biotech both registered fresh all-time highs this week after breaking through key HIGHS from 2018, 2019, and 2020, Banks and Aerospace & Defense just failed at their key LOWS from 2018 and remain trapped beneath significant overhead supply.
Building on this theme, let’s dive into our Sector ETF table where we can see the strength from Biotech reflected in the performance of Health Care (XLV) this week.
Just like the Industry ETFs above, it’s no coincidence that Health Care was the only positive sector on the week considering it is the top-performing sector over the trailing 3-months.
And for the losers, its more of the same story. The four sectors that experienced the largest losses this week (each -5% or more) also happen to be the worst performers over the trailing 3-month and 12-month timeframes.
These areas are Industrials (XLI) and Financials (XLF), which we’ve been writing about shorting for a while now, as well as Energy (XLE) and Real Estate (XLRE).
Looking now at the major US Index ETFs and you’ll never guess… the strongest index over the trailing quarter and year was this week’s leader while the weakest index over the same timeframes was this week’s laggard.