Another Brick in the Wall
By John Stoltzfus,
Chief Investment Strategist
Trend Analysis
Market Strategy Radar Screen Weekly October 03, 2016
In this article:
- Any significant shortfall from survey expectations for the non-farm jobs gain would likely serve as a catalyst for a jump in volatility
- but we doubt that it would be one of lasting consequence.
September Entered Like a Lion But Exited Like a Lamb
Worries that rattled investors at the month’s start dissipated as the month progressed
For all the worry heard around the markets at the start of last month, September 2016 cleaned up pretty good as equities managed to skirt around negative market sentiment tied to worries about the upcoming stateside elections; prospects for yet another quarter of negative earnings growth; volatility in the price of oil; a relative rise in market volatility; and a softening stateside in some of the economic data that crossed the transom over the course of the month.
After all was said and done stocks, as represented by the S&P 500 index, ended the month not far from where they started─pretty much flat with a modest negative bias (off just -0.12%).
The real exciting stuff for us took a glance under the hood as US stocks delivered their best quarter of the year, with the S&P 500 index rising 3.31% in price for a 3.84% total return (assuming dividend reinvestment; return calculations exclude applicable costs).
Sector rotation was a key feature of the third quarter as two of the best-performing sectors (both defensives) from the first half of the year saw their performance fade, while two earlier lagging sectors (both cyclicals) gained favor with investors to lead sector performance.
The Telecom sector and the Utilities sector, which had led performance in the first half of the year (respectively up 21.8% and 21.2%), fell to the bottom in performance among the S&P 500’s sectors in the third quarter, shedding 6.6% and 6.7% respectively in the period (see chart on next page).
The Financials sector and the Technology sector, which performed at the bottom of sector performance in the first half of the year (declining respectively -4.15% and -1.2%), rose to the top among the S&P 500’s sectors in the third quarter, rising 4.03% and 12.4% in the period.
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