Last week the market, as measured by the S&P 500 Index, had a negative return of 0.50%, trading at an annualized 8.5% volatility. The VIX index increased 12.86% to 15.18 for the week.
The weekly sector performances, as measured by the S&P 500 sector indices were:
|
From August 20, 2012 to August 24, 2012 |
|
|
|
Sector |
Index |
Return |
Return over S&P |
Volatility |
Correlation to S&P |
|
Healthcare |
HEA |
0.62% |
1.12% |
7.0% |
85.7% |
|
Financials |
FIN |
0.00% |
0.50% |
9.7% |
84.2% |
|
Discretionary |
CDI |
-0.25% |
0.24% |
9.2% |
86.1% |
|
Technology |
TEC |
-0.60% |
-0.10% |
10.0% |
90.7% |
|
Energy |
ENE |
-0.68% |
-0.18% |
9.9% |
95.9% |
|
Staples |
CST |
-0.86% |
-0.36% |
10.4% |
94.6% |
|
Materials |
MAT |
-0.97% |
-0.47% |
14.9% |
58.8% |
|
Telecom |
TEL |
-1.14% |
-0.64% |
15.5% |
69.9% |
|
Industrials |
IND |
-1.27% |
-0.77% |
7.6% |
93.2% |
|
Utilities |
UTL |
-1.35% |
-0.86% |
9.6% |
96.8% |
|
S&P 500 |
S&P |
-0.50% |
0.00% |
8.5% |
100.0% |
The S&P 500 return was negative for the week, but at increased volatility, the VIX has increased by 12.86%. Except for the Healthcare sector, which gave us a strong 1.12% outperformance over the S&P 500, and outperformance by the Financials and Discretionary sectors, the other seven sectors had a negative outperformance for the week.
Healthcare sector was a surprising strong performer this week driven by mergers and acquisitions. Financials sector benefited from investor expectations of potential increase in quantitative easing by the Federal Reserve, while the Discretionary sector benefited from increase in consumer confidence.
The rest of defensive sectors such as Utilities, Telecom and Staples, have underperformed this week, signaling continued mid-term rotation out of defensive sectors. The Industrials sector gave up gains from last week, while Materials sector has continued to show weakness. The Energy sector, although still showing negative outperformance relative to the S&P, has slowed down its decline, due to decrease in inventory and continued tensions in Middle East.
Most defensive sector have unperformed, despite the fact that the recent rally is over with and that the weekly return was negative. What this potentially implies, and despite the increase in volatility, is that the investors have taken a breather from the strong month to date S&P 500 performance of 3.60% (more than a quarter of the year to date performance of 12.21%), but they have not lost the enthusiasm for the equities in the short term. We believe the recent rally will continue, driven by the expectation of Ben Bernanke's speech this upcoming week, with potential confirmation of more stimulus of some kind.
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Month to Date and Year to Date sector returns are provided for comparison.
|
From July 2, 2012 to August 24, 2012 |
|
|
|
|
MTD Sector Performance |
Index |
Return |
Return over S&P |
Volatility |
Correlation to S&P |
|
Energy |
ENE |
6.83% |
3.23% |
16.9% |
86.2% |
|
Technology |
TEC |
6.11% |
2.52% |
15.3% |
88.2% |
|
Discretionary |
CDI |
3.64% |
0.04% |
13.1% |
88.9% |
|
Telecom |
TEL |
3.37% |
-0.23% |
14.9% |
62.4% |
|
Financials |
FIN |
3.06% |
-0.53% |
15.0% |
88.3% |
|
Industrials |
IND |
2.51% |
-1.08% |
14.7% |
92.3% |
|
Staples |
CST |
2.28% |
-1.32% |
9.7% |
82.7% |
|
Healthcare |
HEA |
1.60% |
-1.99% |
11.9% |
82.6% |
|
Materials |
MAT |
1.35% |
-2.24% |
15.3% |
84.9% |
|
Utilities |
UTL |
-1.53% |
-5.13% |
9.9% |
71.2% |
|
S&P 500 |
S&P |
3.60% |
0.00% |
11.9% |
100.0% |
|
From January 3, 2012 to August 24, 2012 |
|
|
|
YTD Sector Performance |
Index |
Return |
Return over S&P |
Volatility |
Correlation to S&P |
|
Technology |
TEC |
19.60% |
7.39% |
17.9% |
89.8% |
|
Telecom |
TEL |
17.16% |
4.95% |
12.4% |
58.3% |
|
Discretionary |
CDI |
16.14% |
3.93% |
8.8% |
78.6% |
|
Financials |
FIN |
16.09% |
3.88% |
19.1% |
90.5% |
|
Healthcare |
HEA |
11.42% |
-0.78% |
10.9% |
87.4% |
|
Staples |
CST |
9.40% |
-2.81% |
14.5% |
90.3% |
|
Industrials |
IND |
8.73% |
-3.47% |
15.9% |
93.7% |
|
Materials |
MAT |
6.73% |
-5.48% |
16.3% |
90.5% |
|
Energy |
ENE |
3.23% |
-8.98% |
18.1% |
87.6% |
|
Utilities |
UTL |
1.06% |
-11.15% |
9.2% |
51.2% |
|
S&P 500 |
S&P |
12.21% |
0.00% |
13.0% |
100.0% |
