Mark's Commentaries
Mar
8
2010
Sector Performance During the Downfall, and then Rebound
by Mark
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As we twiddle our thumbs waiting for tomorrow's premarket markup on the road to S&P 1150, Bespoke Investment blog brings us an interesting chart which shows sector performance during both the downfall (Oct 07 to Mar 09) and then ensuing rebound. Not surprisngly financials (+143%) carried the banner of "the harder they fall, the more they bounce" as they had lost so much value the rebound came off a low base. This crisis was so financial specific it is hard to draw many historical lessons from the financial sector.
But I thought surely technology would be the 2nd best performer (+82%)... instead it has been... lo and behold, consumer discretionary (+98%). I correctly thought in 2007 and 2008 this area would be demolished as the over indebted US consumer, relying on the house ATM to "keep up with the Joneses" would be crushed. [Apr 14, 2008: Stuff I've Been Negative on Since Fall 2007] But I completely missed the fact that institutional money would rush right back into this area even if valuations are incredibly hefty and consumer spending is still nowhere near where it used to be. A lesson to be learned for the next time we come out of a serious downfall in the stock market. Closely following cons disc are industrials (+95%) - another classic "playbook" area to buy coming out of a recession. These are textbook sectors to expect investors to run into and indeed this is what happened.
Not surprisingly consumer staples were the area that held up the best throughout the time frame, now almost exactly where they were before this whole mess began.
But I thought surely technology would be the 2nd best performer (+82%)... instead it has been... lo and behold, consumer discretionary (+98%). I correctly thought in 2007 and 2008 this area would be demolished as the over indebted US consumer, relying on the house ATM to "keep up with the Joneses" would be crushed. [Apr 14, 2008: Stuff I've Been Negative on Since Fall 2007] But I completely missed the fact that institutional money would rush right back into this area even if valuations are incredibly hefty and consumer spending is still nowhere near where it used to be. A lesson to be learned for the next time we come out of a serious downfall in the stock market. Closely following cons disc are industrials (+95%) - another classic "playbook" area to buy coming out of a recession. These are textbook sectors to expect investors to run into and indeed this is what happened.
Not surprisingly consumer staples were the area that held up the best throughout the time frame, now almost exactly where they were before this whole mess began.
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