Given the fact that nearly every group has declined since the April peak in the S&P 500, it can be hard for investors to decipher which areas of the market have provided cover over the last two months. To that end, the charts below show the relative strength of major groups to the S&P 500 over the last year.
For each chart, a rising line indicates the group is outperforming the S&P 500 while a falling line indicates underperformance. We have also included dots to show when the sector's relative strength peaked and troughed relative to the S&P 500 over the last year. Finally, the area of red shading indicates the period since the S&P 500 peaked on April 23rd.
As shown in the charts, two groups (Autos and Capital Goods) saw their relative strength peak when the market peaked, and they are also among the four groups which have seen the biggest declines in their relative strength (Consumer Durables and Retailers are the other two). On the other side of the spectrum, four groups (Food, Bevg, and Tobacco, Household Products, Telecom Services, and Utilities) saw their relative strength bottom when the S&P 500 peaked in April, and these are also the four groups which have seen the largest improvement in their relative strength since April 23rd.
Going forward, investors of the view that the declines will continue should focus on the groups which have seen the largest increases in relative strength, while those looking for a recovery in stock prices should focus their attention on groups which have seen the biggest declines in relative strength during the shaded period. Finally, investors may want to pay close attention to the Diversified Financials group. Back in April, relative strength declined ahead of the S&P 500's peak. While the group has yet to make a sharp turn higher in the current period, it has been showing signs of rounding out a bottom.
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