The last two months of 2016 certainly aren’t getting off to a very good start for anyone who is long equities. For the majority of managers out there who are already underperforming, a day like today only digs the hole a little deeper.
Through the first ten months of 2016, the two top performing sectors in the S&P 500 are Utilities and Energy. Right behind those two, Technology rounds out the top three and is the only other sector that saw a double-digit percentage gain through 10/31. On the downside, Health Care and Consumer Discretionary are the only two sectors in the red this year. Along with these two, the only other sector underperforming the S&P 500 YTD is Financials (+1.9%). Had you asked a random group of investors back in January which sectors would do the best and worst in 2016, we would bet that more people would have expected Utilities and Energy to be on the list of losers than winners. Conversely, at the end of 2015, Health Care (especially biotechs) and Consumer Discretionary were among two of the most loved sectors in the market.
Now that 2016 has essentially emasculated the confidence of most portfolio managers, heading into the last two months of the year, which sectors should investors be looking to add exposure to in order to outperform? Do the sectors that were already winning typically maintain their strength to close out the year, or do investors look to the losers for a rebound. In a B.I.G. Tips report just published for Premium and Institutional subscribers, we looked at sector returns going back to 1990 in order to see what patterns the best and worst performing sectors through 10/31 exhibit in the final two months of the year.
To view our just-published B.I.G. Tips report titled “Buy the Winning Sectors or the Losers?,” sign up for a monthly Bespoke Premium membership and get 10% off for life ($89/month).