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To say that last month’s election was one of the most impactful Presidential elections in recent memory would be an understatement. Sure, there were big moves in the market when President Obama was elected, but in the weeks that followed, stocks across different sectors all moved in the same direction (lower). This time around, the rotation has been something to behold. To illustrate this, in the charts below, we compare YTD performance ranks of the ten major sectors throughout 2016.
To start off, the biggest rotation we have seen is in Financials and Utilities. Throughout most of 2016, Utilities, with their high yields, were the top-performing sector in the S&P 500. Post-election, though, that leadership came crashing down, as the sector has gone from first to nearly worst in the span of four weeks. The sector is still up 8.5% on the year, but that ranks as the fourth worst of the ten sectors. In what has been a mirror image of Utilities, the Financial sector has gone from worst to nearly first over the same span. With a gain of 21% on the year, the only other sector doing better YTD is Energy (23.5%).
While the magnitude of the shift has been smaller, Industrials and Technology have seen a similar shift in their YTD performance ranks. As recently as late October, Technology was the second best performing sector YTD, but now ranks at just the sixth best. Industrials, on the other hand, have moved from sixth best up to the third best.
Finally, while many sectors have seen big shifts in their YTD performance ranks, two sectors that have seen little impact in their ranks are Energy and Health Care. The Energy sector was and continues to be the top performing sector, while Health Care has remained in the cellar. Immediately after the election, Health Care (Drugs and Biotech more specifically) got a lift as Clinton’s loss was seen as a positive signal that these companies wouldn’t have a foe in the White House. What the market failed to take into account, though, was that Trump’s rhetoric towards the sector hasn’t exactly been friendly – a theme that was reinforced in his Person of the Year interview in Time earlier on Wednesday. When it comes to drug pricing, Health Care stocks don’t have many friends in DC on either side of the aisle right now.