Summary of August Sector Performance

Includes: DIA, QQQ, SPY
by: Dan Weiss

Markets were generally higher during the month of August with the broad Russell 3000 Index climbing by 1.5%. Much like July, we saw a reversal of what we saw in the first half of the year with sectors that were generally strong in the first half of the year underperforming. Below is a look at the performance by sector for the month:

August Performance (Russell 3000 by GICS sector)- order by performance
Consumer Discretionary +6.7%
Telecom +2.7%
Consumer Staples +2.6%
Technology +2.5%
Health Care +2.1%
Industrials +1.7%
Financials +0.1%
Utilities -0.5%
Energy -0.8%
Materials -2.8%

Year to date tables (first to 6/08 then 8/08)
Performance by Russell 3000 GICS sector 1/08-6/08 (order by performance):

Energy +12.8%
Materials +2.3%
Utilities -2.8%
Industrials -11.9%
Health Care -12.3%
Technology -12.6%
Consumer Discretionary -15.6%
Telecom -16.9%
Financials -27.1%

Performance by Russell 3000 GICS sector 1/08-8/08 (order by performance):

Consumer Staples -2.5%
Materials -4.2%
Energy -4.6%
Health Care -5.1%
Industrials -8.8%
Consumer Discretionary -9.5%
Utilities -9.6%
Technology -11.5%
Telecom -18.7%
Financials -22.0%

It is clearly evident that leadership has undergone a significant shift thus far in the third quarter. Markets typically look 6-9 months ahead and they are beginning to show signs of a potential domestic economic recovery in the early portion of 2009. Of course, we had one of these false starts earlier in the year. Some of the positives looking forward include improving consumer confidence (at least temporary), declines in energy and food prices, a stimulative interest rate environment, the eventual bottom in the housing market, and a thus far resilient U.S. economy. Meanwhile, negatives include that the housing market is still declining in most (although not all) cities, a potential slowdown in export growth as economies in Europe and emerging markets slow, a very low savings rate,  inflationary pressures that still exist (although potentially less so than a couple months ago), and uncertainty related to the November elections.

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