Entering text into the input field will update the search result below

Are Technology And Consumer Discretionary Stocks Has-Beens?

Dec. 05, 2018 12:46 PM ETPRDGX, PRFDX, VEIPX, VGENX, VTV3 Comments
Tom Madell profile picture
Tom Madell


  • Technology and Consumer Discretionary stocks have been the best performing sectors through most of the current expansion.
  • However, over the last 6 months, Utilities and Consumer Staples have done considerably better than the above sectors.
  • Research has shown that Technology and Consumer Discretionary stocks tend to lag during late in the economic cycle.
  • Since evidence is building that we are in the late stage of this cycle, investors will want to de-emphasize them.

While, for the entire year thus far, the average U.S. stock fund or ETF is showing small positive returns, if one looks at how most funds have done since late January, we see that, generally, there have been no gains, and even losses.

Ten months is a long period for stocks to have been stalled, especially considering how they did during the prior 5 years from 2013 through 2017. For example, looking at three major domestic stock index ETFs, we can see this visually:


Net Asset Value1/26/18

Net Asset Value11/30/18

5 Yr. Ann.Return

Vanguard S&P 500 ETF (VOO)




Vanguard Sm.-Cap ETF (VB)




Vanguard Mid-Cap ETF (VO)




Since these 3 index funds are usually outperformers compared to most diversified Large, Small, and Mid-Cap funds, we can see that, on the whole, it's been a volatile 10 months with little overall gains.

Things could still change during the remainder of this year, but only once over the last 5 years, in 2015, did we also see flat to slightly negative returns. But the remaining 4 years generally showed double-digit returns. As it now appears, those 5 years were still relatively early in our now long economic expansion.

Now, however, I, along with prominent economists, are starting to see some evidence that the current economic cycle is in its latter stages. But the evidence thus far is somewhat mixed.

You might be asking what difference does it make to a fund investor where we are in this cycle? It turns out it could be quite a bit.

It is always tricky to determine exactly the boundary line between the middle and late stage of an expansion, although the fact that we are now well into the 9th year of an

This article was written by

Tom Madell profile picture
Tom Madell, Ph.D., is the publisher of Mutual Fund/ETF Research Newsletter, a free newsletter which began publication in 1999 with thousands of readers. It has become one of the most popular mutual fund/ETF newsletters on the internet, as shown here. His site has been named as one of the "Top 12 Investment Newsletters Focusing on Mutual Funds" at mutualfunds.com , an important fund information provider, under "Fund Newsletter". Also, recently his Newsletter was recognized as one of 5 expert mutual fund resources worth following offering free, and, in its case, particularly "unbiased, useful, and original advice" at http://funds-newsletter.com/fundreference-art.htm .He is also a researcher/writer/investor whose articles have appeared on hundreds of websites, including the Wall Street Journal, USA Today, Morningstar and in the international media.His articles have been among the most popular among those posted on the Morningstar.com website by non-Morningstar employed contributors.His recommendations have an outstanding, long-standing record of success . His complete list of former articles can be accessed at http://funds-newsletter.com

Analyst’s Disclosure: I am/we are long PRFDX, VEIPX, VGENX, VTV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (3)

RedRock Asset Management GmbH profile picture
I like this article (yes this post comes after more than 3 years, but I am reading all your articles only now Sir) but I tend to disagree with the idea that in the late cycle the Technology ETF performs poorly. I did some reasearch and to me, using as a "late" cycle, the following periods:
30/4/2005 - 30/12/2007
30/7/2010 - 30/7 /2012
30/11/2014 - 28/2/2017
30/12/2018 - 30/3/2020

the ETF xlk has been the best performers. I guess all depends on how we define the cycle, but, in general, what do you think?
Smart article. Very timely.
labard profile picture
Mr. Maddell,
Thank you very much for this macro view. Much appreciated.
Judy Bardugo
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.