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Below, is an examination of performance for the Russell 1000 and Russell 2000 Indices by GICS sector followed by my commentary.


Russell 1000- Large Cap
Performance: by GICS Sector

Index -1.9%
Energy +19.2% (14% of Index)
Utilities +8.0% (4% of Index)
Materials +5.8% (4% of Index)
Technology +3.2% (16% of Index)
Health Care -1.1% (11% of Index)
Telecom -2.5% (3% of Index)
Consumer Staples -5.4% (10% of Index)
Industrials -8.0% (12% of Index)
Consumer Discretionary -8.1% (9% of Index)
Financials -16.9% (16% of Index)

Russell 2000- Small Cap
Performance: by GICS sector:
Index 0.6%
Energy +44.1% this is not a typo (9% of Index)
Materials +5.5% (6% of Index)
Utilities +3.3% (3% of Index)
Industrials +3.1% (16% of Index)
Technology +2.2% (18% of Index)
Health Care -1.1% (13% of Index)
Telecom -3.2% (1% of Index)
Consumer Staples -7.4% (3% of Index)
Consumer Discretionary -8.9% (13% of Index)
Financials -12.8% (19% of Index)

Overall, it was a difficult quarter for anyone who is more contrarian focused and probably a good quarter for those who have followed the momentum of the past several quarters in energy and materials. There was little divergence between sector returns in small cap and large cap with the exception of the huge outperformance in small cap energy (I don't remember the last time I saw a +44% quarterly return out of a GICS sector) over those large cap stocks in the same sector and an outperformance among smaller industrial names. Almost anything with an association to consumer spending (with the exception of energy) had a difficult quarter although if one were to look at returns in April consumer discretionary (+4%) and financials (+6%) had strong returns only to underperform later in the quarter.

Looking ahead, I have positioned my portfolio strictly on a bottom-up basis with exposure in many sectors, although I do not at the present time have any exposure to energy or financials outside of a small-cap asset management firm which I consider to be one of the least expensive stocks that I have seen in my career. I anticipate a short-term decline in energy prices, but the situation with Iran/Israel adds a significant geopolitical risk, muddying any type of prediction of short term prices. I am currently evaluating potential portfolio implications from the upcoming elections and may update some of my discount rates and future earnings figures for some of these companies based on various scenarios. Overall, it was an extremely difficult quarter and we all hope for improving conditions in the back-half of the year.

Source: A Look at the Russell 1000 and the Russell 2000