The charts below show the relative strength of the ten S&P 500 sectors as well as the Dow Jones Transports and the Russell 2000 relative to the S&P 500 over the last year. When the line is rising it indicates that the sector is outperforming the S&P 500, while a falling line indicates underperformance. We have also shaded each sector/index in red or green to indicate whether the sector has outperformed (green) or underperformed (red) the S&P 500 over the last year.
Of the ten S&P sectors, six have outperformed the S&P 500 over the last year, while four have underperformed. The two sectors that have seen the strongest outperformance in the last year are Financials and Consumer Discretionary. Consumer Discretionary has been one of the market's mainstays throughout the bull market, but for Financials, the outperformance is a more recent phenomenon. Following those two sectors, Health Care and Telecom Services are not far behind, while Industrials and Consumer Staples are barely outperforming over the last year. While Industrials are barely outperforming over the last year, were it not for the last two months, the sector would still be deep in the hole.
Of the sectors underperforming, Utilities has seen the greatest degree of underperformance as investors are fleeing the sector in advance of what is likely to be higher taxes on dividends in 2013. Behind Utilities, Energy stocks have also been under heavy pressure over the last year. In addition to the four sectors that have underperformed the S&P 500 over the last year, both the DJ Transports and the Russell 2000 have underperformed as well. That being said, the two indices have been moving in opposite directions recently. For much of the rally from late July through September, small caps led the market higher but then saw a peak in their relative performance on 9/14, which was the exact day that the S&P 500 saw its highs for the year. Around the same time that small caps faltered, though, Transports bottomed, and ever since then the index has been steadily outperforming the broader market.