Who Would Have Thought
Igor Manukhov - May 10, 2024
Sector leadership could change. It is important have an unbiased market evaluation process.
The market has been recovering from April’s selloff quite nicely. Time will tell if there is any weakness on the horizon, but for now, it appears to be just a bump on the road. I was going through my regular chartbook review earlier this week when I spotted something unusual. We are in the middle of a bull market, yet the utility sector is beating technology sector so far in 2024 (the black line on the chart below is starting to trend up). Usually, a conservative utilities sector outperforms a growth sector like technology during bad markets, not good markets. Of course, that could mean that not all good under the hood of the market, but I believe in presumption of innocence until proven guilty. Traditionally stronger sectors like technology and consumer discretionary sectors (think Apple, Tesla, etc.) have been underperforming overall market this year. Whereas utility, energy and financial sectors have been outperforming so far.
Of course, that could change also, but it is a great reminder that nothing lasts forever in the stock market. Previous norms and trends could change. When I started in the business, everyone wanted to buy Canadian Energy companies, and no one wanted to touch technology due to tech bubble aftermath. 10 years later, roles reversed. Everyone wanted technology and no one wanted energy.
This surprising strength in utility sector again reinforced my belief that chart analysis is a very powerful tool for investors. It allows us to see where the wind of the market is blowing and adjust our sails accordingly.
