S&P500 by sectors – financials and consumer discretionary outperform?

Posted on 03 June 2010

It’s interesting that financials and consumer discretionary – the sectors that were most richly rewarded with government support through the crisis – are outperforming the broader index. Still with the financials about to cycle back to the 1950′s (cardigans and crewcuts) and the credit revaluation trade a receding hairline, it’s hard to see this outperformance prevailing.

But then looking to the energy and materials sectors, it’s also hard to get enthusiastic about their prospects either. With both currently trading through their 200 day MA, it’s likely a matter of time before the dreaded death cross (50 day MA trades through 200 day MA) is stamped on their foreheads.

While in the boiler room of the economy, the homebuilders subindex has also dropped through its 200 day MA. If a healthy home construction sector is the bedrock of an economy, then this chart is displaying disturbing symptoms. It’s a volatile beast, but with the builders trading below the broader index – it’s a fair chance that the macro economy will follow.

Finally, and perhaps the cleanest to interpret of all, the capital intensive sectors are capitulating. The realisation that credit spreads will be driven wider by the global scramble for capital is slowly permeating the equities (and debt) markets. It’s remarkable that the financials remain seemingly immune to this trend…