Ever since the GOP tax reform bill moved out of the Senate Budget Committee on the 28th of November, we’ve seen some pretty big rotation out of some sectors and into others. The biggest loser by far, though, has been Technology, while Financials and Industrials have been beneficiaries. The chart below shows the relative strength of all three sectors versus the S&P 500 over the last year where a rising line indicates the sector is outperforming the S&P 500, while a falling line indicates underperformance.
As shown in the chart, Technology had been a huge outperformer on the year leading up to late November, while both Financials and Industrials were lagging the market. That trend came to an abrupt halt last Tuesday, though, when the trends completely reversed. Now before we all start crying over the performance of the Technology sector, we would note that even after the recent moves, it is still outperforming every other sector this year by more than 15 percentage points, so there is a long way to go before it is actually lagging. Furthermore, the stocks that have been hit the hardest are still, for the most part, the biggest winners in 2017. The move in Financials, however, has been impactful as the sector has gone from underperforming the S&P 500 to outperforming on a YTD basis.