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The S&P 500 finally regained all it had lost in the 2008-2009 “financial crisis” bear market just last week. It put in another new high this week. The index consists of 10 major sectors, and as you have probably surmised, not all of them are celebrating the rebound. In fact, only five of the ten managed to establish a new high in the past month. One would think that new index highs would produce something better than a 50% participation rate. However, since the S&P 500 is a weighted-average of the underlying sectors, it makes sense that about half are doing better and half are not.

The price-based version of the index the financial media reports on every day does not account for dividends. With dividends reinvested, the S&P 500 actually surpassed its old high last August. Since including dividends provides a better comparison, we’ll use dividend-adjusted data in our sector performance discussion below.

Consumer Staples was the first sector to establish a new high and did so more than three years ago in March 2010. Next to make a full recovery was Consumer Discretionary in January 2011. April 2011 was a good month, as both Healthcare and Industrials established new highs. For more than a year, these were the only four sectors hitting new highs. Utilities became the fifth and final one in June 2012, just two months before the S&P 500 accomplished the task.

Looking at a chart that only goes back to 2007 could fool you into thinking that Technology established a new high in January 2012, but that would be only partially correct. Yes, Technology recovered from the financial bear market by early 2012, but it was still down nearly 50% from its 2000 peak. Today, Technology is still 42% below its all-time high.

Of the sectors yet to make new highs, Materials and Energy are the closest two, with each about 5% away. Like Technology, Telecom is still reeling from the 2001-2002 bear market and is 46% below its former peak. The Financials sector was at the heart of the recent bear market and is 45% below its previous high.

Sector performance typically displays a wide level of divergence in nearly every decade, and recent history is no exception. Five sectors have been making new highs, and two are within a few percentage points of doing so. The lagging trio of Financials, Technology and Telecom are all more than 40% below their prior peaks. Just think where the S&P 500 might be today without these three.

Investor Heat Map: 4/3/13

Sectors

Investor nervousness is now obvious in the Sector rankings. All sectors remain in positive trends, but the relative order is revealing. The defensive trio of Healthcare, Consumer Staples and Utilities now owns the top three spots. Healthcare pushed Consumer Staples aside to grab first place even though Consumer Staples added strength during the week. Utilities jumped from fifth to third to complete the defensive alignment. Consumer Discretionary and Financials managed to hold on to their upper tier rankings during the shakeup. Real Estate moved up two spots to sixth as Industrials and Energy each slid a notch. Telecom held its position, and there is a large drop in strength between it and the bottom two categories. Technology’s absolute strength continued to decline, although on a relative basis it finally climbed out of last place. Materials now holds that dubious honor.

Styles

The Style rankings are exhibiting more compression this week with only 10 points separating the top from the bottom. However, the lineup fails to confirm the “defensive” posture of the Sector rankings because the expected relative strength in the blue chip Mega Cap and Large Cap categories is missing. Mid Cap Value recaptured the top spot, after relinquishing it to Micro Cap for a couple of weeks. Mid Cap Blend jumped from sixth to second, and Large Cap Value accomplished a similar feat climbing four spots to third. Micro Cap fell to fourth as part of the reshuffling, which saw the three Small Cap categories all move from the upper half to lower half. The changes haven’t affected the bottom two categories yet. Large Cap Growth and Mega Cap continue to be the laggards.

Global

Japan ended the month of March on a high note and then tumbled hard as April trading got underway, dropping about 4% on the first day of the month. The U.S. is now right on the heels of Japan and could move into first place if Japan continues to falter. The next four regions in the lineup are nearly the same as last week, with only Pacific ex-Japan and World Equity swapping places. Canada held its relative position and managed to edge itself across the demarcation line from barely negative to slightly positive. The bottom four categories remain in downward trends. Europe, Latin America and Emerging Markets have been struggling to mount a sustainable rally while China’s troubles appear to be increasing.

Note: The charts depict both the relative strength and absolute strength of various market sectors, styles, and geographic locations on an intermediate-term basis. Each grouping is sorted (top to bottom) by relative strength. The magnitude of the displayed RSM value is a measure of absolute strength, which is our proprietary method of measuring and reporting the intermediate-term strength as an annualized value.

Disclosure covering writer, editor, publisher and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned. This article was originally published April 3, 2013 in the Invest With An Edge weekly newsletter.

Source: Defensive Sectors Rule The Roost