August Historical Sector Analysis: Gone Fishing!

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 |  Includes: GNR, ICF, SPY, VHT, XLE, XLF, XLI, XLK, XLP, XLU, XLY, XTL
by: Jon R. Orcutt

This month's historical sector analysis for the month of August shows that over the last twenty-five years the month has been pretty flat. It is not surprising being that most money managers go on vacation during the month of August, but I believe there has been enough volatility to take advantage of if you decide not to take a vacation from investing. Thus far the 2012 market is being compared to 2011 with new fears arising in Europe and somewhat lackluster earnings. However, the S&P 500 and many of the sectors that comprise our economy have been showing considerable resilience, and are still posting very good gains for the year. Strong earnings from Caterpillar (CAT) this morning suggests that things have not been as bad as the analyst have projected.

Taking out the high and the low for statistical analysis you will notice how boring August has been over the last twenty-five years. This is only the second month this year where the S&P 500 TR has experienced a negative trailing twenty-five year mean return. Please note that the other month was June, and the S&P 500 was able to reverse that trend with a gain 4.12%. The low year that was thrown out was the same year for every sector and the S&P 500. That year was 1998, and provides a nice historical view of what the "Asian Flu" looks like when it infects the markets. Being that the markets have been somewhat negative in the month of August it should not be a surprise that historically the best performers have been the lower beta sectors with the lowest standard deviation. Those sectors include: Health Care, Consumer Staples, Utilities and Real Estate. Notice I did not include the energy and natural resource sectors. They trade at a higher beta and with a higher standard deviation than these other sectors, and quite frankly historical analysis has not been reliable when it comes to these two sectors. Perhaps there continued underperformance is a true reflection of how weak global growth has been over the last two years.

It's easy to see why the markets are considered to be on the same path as 2011. The same headline risks exist today, talk of more Fed intervention is once again on the table, and many sectors are performing as they did in 2011. Health care and real estate were two of the top three performing sectors in 2011, and they are the two top performing sectors year-to-date as of the close on July 24th. The same trends can be seen in the underperforming sectors. Natural resource, energy, telecom and industrial stocks continue to lag the market year-to-date which is a continuation of the trend in 2011. One sector is however performing much better thus far this year than it did throughout 2011 and that is financials. The average financials fund is up 8.69% thus far versus an average loss of 14.57% in 2011.

 

 

August

Cons Discr

Health Care

Energy

Financials

Cons Stap

Technology

1987

1.89%

1.48%

-2.56%

5.02%

3.51%

5.86%

1988

-2.90%

-2.74%

-1.13%

-0.46%

-0.06%

-6.20%

1989

3.09%

1.76%

3.09%

4.39%

-1.54%

2.61%

1990

-11.80%

-6.81%

-1.25%

-9.35%

-7.29%

-12.83%

1991

4.02%

3.21%

2.84%

5.40%

3.98%

4.90%

1992

-1.38%

-2.58%

1.56%

-3.24%

-0.44%

-2.80%

1993

6.98%

2.19%

6.13%

3.94%

4.78%

7.15%

1994

4.96%

9.85%

-2.42%

2.68%

6.36%

9.90%

1995

0.63%

2.36%

2.36%

4.67%

-0.17%

1.14%

1996

3.94%

5.89%

5.99%

4.88%

-3.18%

5.44%

1997

-2.61%

-2.61%

4.19%

-3.21%

-3.70%

-0.11%

1998

-14.83%

-16.36%

-22.25%

-20.56%

-12.18%

-19.33%

1999

-5.14%

2.70%

3.64%

-4.89%

-3.24%

5.24%

2000

0.34%

10.63%

13.76%

8.88%

1.54%

15.69%

2001

-5.73%

-1.59%

-6.85%

-3.98%

3.15%

-12.90%

2002

1.10%

-1.42%

2.48%

1.83%

1.26%

-3.11%

2003

4.27%

-1.53%

7.71%

0.06%

1.84%

7.54%

2004

-1.29%

0.99%

-1.94%

2.75%

0.66%

-4.37%

2005

-4.25%

0.99%

7.45%

-1.72%

-1.54%

-0.76%

2006

2.79%

2.68%

-4.32%

1.17%

3.52%

6.26%

2007

1.27%

2.97%

-1.40%

0.65%

2.63%

2.26%

2008

6.36%

0.45%

-2.37%

0.25%

1.79%

1.74%

2009

3.95%

2.08%

0.43%

8.13%

1.68%

2.06%

2010

-4.38%

-2.20%

-5.24%

-7.09%

-2.13%

-4.54%

2011

-6.52%

-6.11%

-9.45%

-9.22%

-2.11%

-7.67%

# Of Up Years

14

15

13

15

13

11

Mean

-0.32%

0.52%

0.39%

0.12%

0.21%

0.30%

Standard Deviation

4.52

3.68

4.56

4.80

2.97

6.27

 

Telecom

Nat Resources

Real Estate

Utilities

Industrials

S&P 500 TR

1987

3.64%

0.19%

-0.43%

3.08%

1.06%

3.73%

1988

-2.86%

-3.25%

-0.33%

-0.31%

-5.45%

-3.39%

1989

0.65%

4.53%

-0.11%

-0.32%

4.62%

1.95%

1990

-8.53%

-3.34%

-5.62%

-5.54%

-13.94%

-9.04%

1991

3.05%

1.22%

0.09%

2.72%

0.27%

2.37%

1992

-1.37%

-0.33%

0.87%

-0.17%

-3.58%

-2.05%

1993

6.64%

4.75%

2.57%

3.44%

3.60%

3.79%

1994

4.19%

1.01%

0.90%

0.91%

4.60%

4.10%

1995

2.11%

0.69%

1.43%

1.22%

-1.47%

0.25%

1996

2.98%

5.59%

4.47%

1.81%

1.95%

2.11%

1997

-2.89%

2.03%

-0.52%

-2.93%

-1.12%

-5.60%

1998

-17.17%

-19.09%

-10.07%

-7.16%

-16.67%

-14.46%

1999

-4.04%

2.33%

-1.55%

-2.98%

-3.48%

-0.49%

2000

5.60%

11.98%

-2.82%

6.87%

3.95%

6.21%

2001

-12.09%

-3.65%

2.99%

-3.93%

-3.89%

-6.26%

2002

1.99%

3.14%

0.12%

2.23%

-1.00%

0.66%

2003

3.60%

6.99%

0.84%

1.17%

4.37%

1.95%

2004

-1.46%

-1.27%

6.94%

2.61%

-0.35%

0.40%

2005

-0.50%

7.46%

-3.43%

1.55%

-1.80%

-0.91%

2006

3.42%

-3.36%

3.49%

2.29%

-0.16%

2.38%

2007

-0.25%

-1.86%

4.58%

1.24%

-0.43%

1.50%

2008

0.57%

-3.90%

2.00%

-1.73%

1.98%

1.45%

2009

-0.47%

0.35%

12.97%

1.47%

4.79%

3.61%

2010

-2.33%

-3.62%

-1.16%

-0.13%

-7.32%

-4.51%

2011

-4.53%

-8.72%

-5.95%

-1.48%

-9.04%

-5.43%

# Of Up Years

13

14

14

14

10

15

Mean

-0.41%

0.30%

0.41%

0.27%

-1.16%

-0.32%

Standard Deviation

4.22

4.02

3.11

2.39

4.65

3.71

             
 

YTD

MTD

2011

     

Consumer Discre

10.83%

-2.29%

1.71%

     

Health Care

13.27%

-1.85%

7.98%

     

Energy

-5.22%

0.37%

-5.57%

     

Financials

8.69%

-2.78%

-14.57%

     

Consumer Staples

7.55%

-1.61%

5.41%

     

Technology

5.21%

-4.37%

-7.39%

     

Telecom

2.44%

-2.62%

-5.00%

     

Nat Resources

-6.32%

-1.92%

-13.95%

     

Real Estate

14.01%

-0.24%

7.27%

     

Utilities

4.65%

-0.10%

10.32%

     

Industrials

2.92%

-4.10%

-8.11%

     
Click to enlarge

ETF ideas for each sector:

Cons Discretionary Select Sector SPDR (XLY)

Vanguard Health Care ETF (VHT)

Financial Select Sector SPDR (XLF)

Technology Select Sector SPDR (XLK)

SPDR S&P Telecom (XTL)

iShares Cohen & Steers Realty Majors (ICF)

Consumer Staples Select Sector SPDR (XLP)

Energy Select Sector SPDR (XLE)

Utilities Select Sector SPDR (XLU)

SPDR S&P Global Nat Resources (GNR)

Industrial Select Sector SPDR (XLI)

S&P 500 Index (SPY)

Click to enlarge

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SPY over the next 72 hours.