There has been lots of chatter about “sector rotation” in 2016, much more so than we’ve seen in prior years.  We wanted to see if we could highlight this sector rotation in chart form, and the best way to do that is using a heatmap.  Below, we chart a heatmap of rolling 3-month performance (%) for the ten S&P 500 sectors, with more defensive sectors at the top of the graph and more cyclical sectors at the bottom.  Green (from lighter to darker) indicates a period of outperformance over the prior three months, while red (lighter to darker) indicates a period of underperformance.  As the chart shows, more defensive sectors have started to stumble recently while the more cyclical Technology sector and to a lesser degree Health Care and Industrials have rallied over the last three months.  We note that while the “middle” of the chart — Energy and Materials — were both extremely strong gainers for most of the year following their plunge at the start of 2016, they haven’t been ramping up to the same degree recently. Tech has seen an extremely strong performance over the last few months as the more cyclical stocks in general have benefited from improving economic sentiment.

Overall, we think this heatmap does a good job of showing rotation in and out of various sectors over the last year.  There’s only one sector of the ten — Industrials — that hasn’t gone through a period of big outperformance (dark green) or big underperformance (dark red) over the last year.

081916 Sector Rotation


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