Monitoring Individual Sectors
We are back to setting records on Wall Street. Throughout all of the unknowns this year, one thing investors are becoming accustom to is all the records that have been set so far this year. This week the S&P 500 posted an impressive gain of 12.1%, setting the best weekly increase since late 1974.[i]
With all of the big up and down days, it helps to take a step back to see how individual sectors and the broad index have performed year-to-date, which sectors held up better on the selloff, and which sectors are now leading the rally.
Year-to-date the S&P 500 is down 13.6%, which by any standards would be considered a really bad year, but when you compare it to the -33.9% low for the year, which happened just 13 trading days ago, it takes some of the sting away. Looking at the individual sectors, Utilities have weathered the storm better, down 5.8% for the same period. Followed by Healthcare, which is down 6.9% year-to-date. On the other end, the Energy sector is down the most, pulling back 43.1%, followed by Financial sector with a decrease of 24.1%.
Looking at the selloff from peak to trough, the S&P 500 decreased by 33.9% and the worst performing sector was Energy, down 56%, while the sector that fell the least was Consumer Staples with a drop of 24.3%.
On the other hand, we have now experienced a strong rally since the March 23rd lows, with the S&P 500 increasing 24.7% as of Thursday’s close. The strongest sector return was posted by Energy at 43.4% and the weakest increase came from the Communication sector up only 14.8%.
It is much too early to tell if the March bottom will turn out to be the lows of this bear market, but one thing for sure is that more volatility is expected. Very shortly, many of the S&P 500 companies will begin to report their first quarter numbers and we will start to see the impact on revenues, profit margins and earnings per share caused by COVID-19. Companies that have multiple channels for revenue source may hold up better than companies that do not. Disney for example, will be hurt because their parks have been closed, but will benefit from people staying at home and streaming content from their Disney+ service. In fact, they just announced a milestone of reaching 50 million subscribers, which is close to their five-year target of 60-90 million, in only five months. Disney is expected to report earnings on May 8th. We will keep you updated as the results are announced.