One of my favorite Eddy Murphy movies was Trading Places. It’s a great story starring Dan Ackroyd as a successful currency trader, Jamie Lee Curtis as a prostitute, and Eddy Murphy as a street beggar. Dan Ackroyd and Eddy Murphy, through no fault of their own, end up “trading places” with their lifestyles – with Jamie Lee Curtis becoming involved in the escapades. I highly recommend the film if you haven’t seen it. Great fun!
There’s also been some “trading places” amongst stock market sectors these days. Consumer staples are rising after a period of underperformance, as are utilities. Meanwhile, Financials and Healthcare are falling after a period of outperformance. The stockcharts.com “perf charts” (Performance charts) I’ve posted here illustrate this rotation. I’ve set the default to 31 day lookback periods. The first chart is for June-July, then the next chart is July to August. These charts offer a back-to-back comparison of the recent vs previous 31 day periods. You can really see how stark this rotation has been affecting the staples, healthcare, utilities and financials sectors on the right side of the chart. On the left side of the chart, you’ll also see energy, technology, materials and industrials trading places.
You can account for some of this rotation as seasonal factors. For example, staples and utilities are usually stronger than the higher beta sectors at this time of the year. Financials, however, are typically finished their period of outperformance in April, which defies their strength through most of the summer (until recently). Seasonals don’t always work, but they do have influence.
Given the bombs that seem to be flying around in the east, not to mention homeland trade wars and US healthcare dilemmas, I won’t be surprised if defensive sectors like utilities and staples remain in the outperformance camp for a while.
Hope you all have a happy long weekend—I’ll be back next week to post my usual blogs, and to make my monthly BNN appearance on Wednesday (Sept 6th) for their 5:30 MarketCall show. More info on that below. Happy trading!
Keith on BNN’s MarketCall Tonight show, Wednesday September 6, 2017 at 5:30pm
Keith will be on BNN’s popular call-in show “MarketCall” Wednesday September 6th for the 5:30 pm show. Phone in with your questions on technical analysis for Keith during the show. CALL TOLL-FREE 1-855-326-6266. Or email your questions ahead of time (specify they are for Keith) to [email protected]
Keith at the MoneyShow Saturday, Sep 9, 2017 for 2 presentations
Click here for details.
10:45 am: How to Profit from Fear and Greed
2:45pm: Technically trading ETF’s
2 Comments
Hi Keith,
Re. sector rotation, the markets really seem to be bipolar (in Canada). The cyclicals one day, defensives the next. Today it’s the cyclical sectors leading on the $TSX. Been largely out of the stock market since March. The $TSX seems like it may be tryng to bounce now in the short term. The $SPX seems less bipolar but complacent. Good timing with the rotation discussion.
Thanks for the blast from the past! I enjoyed Trading Places but it’s been a long time. Hope you have had a great summer. Enjoy the long weekend.
Ron
Yes, the rotation and “bipolar” attitude shows in market breadth–despite a rising market, its been on a few select stocks that change hands once in a while, without a broad cross section of stocks moving together.