The charts below show the relative strength of the ten S&P 500 sectors versus the overall index during the last year. In addition to the ten sectors, the bottom two charts also show the relative strength of the Transports and the Russell 2000 versus the S&P 500. 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 in red or green to indicate whether the sector has outperformed (green) or underperformed (red) the S&P 500 over the last year.
Over the last twelve months, five out of ten sectors are outperforming the overall index while five are underperforming. Sectors outperforming by the widest margin include Financials, Consumer Discretionary, and Health Care. On the downside, the biggest underperformers over the last year have been Technology, Materials, and Energy. The weakness in Technology is largely AAPL related as that stock's large weighting in the sector has acted as an anchor. While the Industrials sector has underperformed over the last year, in the last four months the sector has really staged a turnaround as its exposure to international markets has been a positive since the election.
Finally, like the Industrials sector, Transports and the Russell 2000 have both underperformed the S&P 500 over the last year, but both indices have also seen steady outperformance since last Fall. Many investors like to see confirmation of a rally or decline on the part of either the Transports and/or the Russell 2000. With that in mind, the outperformance we have seen over few months is music to the bulls' ears.