S&P 500 Hits All-Time High, But Not All Sectors Are Participating
The S&P 500 hit another milestone this week closing higher than the all-time high set February 19, 2020. At that time, nobody knew that the index would drop 33.9% in just a few short weeks, setting a historical record for the fastest decrease of its kind that ended the longest bull market in history. Fast forward five months, and here we are setting yet another record, but this time for the shortest bear market in history.
A bear market is traditionally defined as a 20% decrease in the index from a previous peak, but it is not officially called until the index recovers past the previous all-time high. This happened this week and that officialy means the COVID-19 bear market ended in just over a month, and according to Wallstreet jargon, we are now in a bull market since the March low.
Looking back, March was a prime opportunity to invest new money or reallocate a portfolio more aggressively. However, it is much easier said than done. The general investor sentiment was gloomy and not many people felt comfortable investing, yet it turned out to be a great opportunity. Even for seasoned investors, it proved to be difficult to stay positive.
The S&P 500 is now up 4.8% year-to-date, but not all sectors have performed well; technology stocks have led the charge up 26% followed by consumer discretionary stocks gaining 23%. On the other end, the energy sector has lagged the most, down 37%, followed by financials with a decrease of 19% for the same period. Looking at investment strategies, growth stocks have performed well year-to-date, while an index of stocks that pay a consistent dividend is down 4.1%.
As investors question the sustainability of such a large increase by a few stocks, they will begin to look for better opportunities in sectors and strategies that have under performed. We call this a rotation and we are just beginning to see this shift. In preparation, we are reviewing our holdings and will make adjustments that we will communicate with everyone in the next couple of weeks. Furthermore, we will continue to keep our larger than usual cash position because we expect volatility and opportunities as we get closer to the November elections.