Market Leaders Continue to Rotate

Igor Manukhov - Oct 04, 2024

Market leadership continues to change. Pick carefully.

The US market continues to march forward towards one of the best years on record, but only four sectors are currently outperforming this year. I sent out a similar article back in July. Back then, Technology (XLK) and Communication Services (XLC) were leading the way. The best performing sector so far this year by a large margin has been Utilities (XLU). This swift rotation between sectors was the major reason why I chose to focus on asset allocation this year as opposed to any particular sectors or company bets.

The chart below shows the relative performance of each US sector relative to S&P500 overall. 

Color coding is as follows. 

  • Blue and aqua bars indicate outperformance relative to the S&P500
  • Light purple and purple bars indicate periods of underperformance relative to the S&P500
  • Orange bars indicate neutral performance relative to the S&P500

Sector symbols are:

  • XLK – Technology
  • XLY – Consumer Discretionary
  • XLC – Communication Services
  • XLE – Energy
  • XLF – Financial
  • XLI – Industrial
  • XLB – Material
  • XLV – Health Care
  • XLP – Consumer Staples
  • XLU – Utilities
  • LRE – Real Estate

This table allows me to quickly access the relative performance of all sectors to determine areas of opportunities. As you can see, all sectors other than Communication Services, Utilities, Financials and Real Estate are currently underperforming the S&P500. Notice how much colors have changed this year so far. This is not typical. I am happy with the overall result, but I would have loved to see a more solid leader to emerge in this rally.

Besides US sectors, I track many other areas (countries, different asset classes, different investment styles and many more) in a similar format to quickly identify emerging opportunities.