Here is the S&P 500 performance, by industry, since the beginning of April:
S&P 500 +14.3%
Consumer Discretionary +18.3%
Consumer Staples +7.7%
The results are pretty much as one would expect for an up market. The economically sensitive stocks have done very well. The defensives, though up have lagged behind the index badly. The only apparent anomaly is IT, which has lagged the index slightly. This is an S&P sector that contains an unusual mix of very mature companies that have very little growth and more vibrant firms that better fit the image of high-tech. The first camp includes MSFT (#1 in tech market cap), IBM (#2), and CSCO (#4), all of which have underperformed the S&P. The second has AAPL (#3) and GOOG (#5), which have outperformed. My guess is that MSFT will continue to be a drag on IT sector performance, but that the others will perk up as business spending improves.
I’ve been pleasantly surprised by the continuing resilience of world stock markets. I still think that it’s reasonable to expect 10-15% more upside in the next six months or so. More important, I think the pattern shown above, of outperformance by economically-sensitive sectors and underperformance by defensives, will continue. At some point, however, the market will begin to focus on the negatives surrounding the financials and their outperformance will likely cease. My preference has been to concentrate on financials with emerging markets exposure, but that’s just me. This is also a structural decision for me, since I know financials are not my strong suit.