Earlier this morning we sent out a report to Bespoke clients highlighting the key stock characteristics that have been leading this market so far in Q2. One of the things we found interesting in our analysis is that investors have rotated out of Q1’s winners into Q1’s losers thus far in Q2.
Below we have broken the S&P 500 into deciles (10 groups of 50 stocks each) based on stock performance in Q1. The 50 best performing stocks in the S&P 500 are in decile 1 (Best), the next 50 best are in decile 2, and so on and so forth. Decile 10 (Worst) all the way to the right on the chart contains the 50 stocks that performed the worst in Q1.
As shown, the 50 worst performing S&P 500 stocks in Q1 (decile 10) are up an average of 6.1% so far in Q2. This is nearly twice as strong as the average change for the next best decile, which is decile 9. The worst performing deciles in Q2 contain stocks that outperformed in Q1. The 50 best performing stocks in Q1 are up an average of just 1.9% so far this quarter. Decile 2 is up 1.6%, while decile 3 is up just 0.4%. There has been a clear rotational trend in Q2 as investors have moved away from Q1’s winners and into Q1’s losers.