As a G&S client, you’ll frequently hear us discussing Relative Strength, an analysis that compares a security’s price change to an index or another security. This approach allows us to monitor current investments and potentially identify future opportunities. Specifically, if a security has been underperforming the index but begins to exhibit signs of improved performance, it could signal a promising opportunity.


In summary, Relative Strength helps us assess investment trends and make informed decisions based on how securities perform relative to benchmarks or other assets. By understanding these relative movements, we can better position ourselves for potential gains.

Rearview Mirror: What Has Been Working

The VanEck Semiconductor ETF (symbol: SMH) emerged as one of the most robust industry groups in the past year. Let’s delve into the details:

The chart below illustrates the 1-year price performance of SMH, the holdings within SMH (Blue bars), and the SPDR S&P 500 ETF (symbol: SPY).


  • SMH (Green bar) significantly outperformed SPY (Purple bar) during this period. The driving force behind this impressive performance was Nvidia (symbol: NVDA), whose AI-related potential fueled demand for their products.


  • Most of the SMH holdings exhibited Relative Strength compared to SPY.


  • However, it’s essential to note that not all SMH holdings thrived. Four of the holdings (TNX, ON, SWKS, and STM) experienced negative performance over the past year, illustrated by the red bars. As an investor, imagine conducting thorough research on the semiconductor sector only to invest in one of these underperforming stocks—it can indeed be frustrating.

Looking Forward: What Could Be Starting To Work

Three sectors that have been underperforming SPY are starting to show signs of strength. Those sectors include:


  • Real Estate (symbol: XLRE)
  • Energy (symbol: XLE)
  • Materials (symbol: XLB)


The chart below looks at each of these sector's relative strength individually when compared to SPY.

The slope on each sector performance line indicates the security with the stronger performance relative to SPY. A downward slope of the performance line indicates SPY has been stronger, while an upward slope tells us that sector security has been outperforming SPY. A flat line indicates the two securities have similar performance. As depicted in the chart, these three sectors could be in the early stages of attracting buyers, but may need more time to confirm a bullish trend.

Logo in Pantone.png
Visit our Website

7887 E Belleview Ave

Suite 1225

Denver, CO 80111

(303) 773-8000

Connect with us on LinkedIn and YouTube!