Although there remains a couple of weeks before year end, it is interesting to see how the various sectors have fared in such a difficult climate.
The graph above depicts the year to date performances of the various global sectors with the "World" bar measuring the capitalization weighted performance of all sectors combined.
The first striking (although clearly not surprising) observation is that none of the sectors have returned a positive performance (to date). The second would be that financials have suffered the most amongst sectors (again, not surprising considering the central role of financials in the current crisis).
Notice also the striking performance disparity between cyclical and defensive sectors. As we enter what seems to be a protracted global recession, the cyclical sectors which include commodities, information technology and luxury goods are suffering the most as they are pricing the impact of the slump whilst the defensive sectors, which include consumer staples, healthcare and utilities, have shown greater resilience to the downturn. This is somewhat reassuring in an environment where most investment concepts have gone haywire (see previous blog).
In conclusion, with hindsight of course, if one was bearish and expecting a recession at the beginning of the year, a sector rotation strategy would seem to have paid off, although we should emphasize the important caveat that one should never jump to conclusions before the period of measure (in this case one year) is through. We do, after all, live in a world of uncertainty (this year proving to be more so than ever) and so we should rightfully expect that anything can happen.
The graph above depicts the year to date performances of the various global sectors with the "World" bar measuring the capitalization weighted performance of all sectors combined.
The first striking (although clearly not surprising) observation is that none of the sectors have returned a positive performance (to date). The second would be that financials have suffered the most amongst sectors (again, not surprising considering the central role of financials in the current crisis).
Notice also the striking performance disparity between cyclical and defensive sectors. As we enter what seems to be a protracted global recession, the cyclical sectors which include commodities, information technology and luxury goods are suffering the most as they are pricing the impact of the slump whilst the defensive sectors, which include consumer staples, healthcare and utilities, have shown greater resilience to the downturn. This is somewhat reassuring in an environment where most investment concepts have gone haywire (see previous blog).
In conclusion, with hindsight of course, if one was bearish and expecting a recession at the beginning of the year, a sector rotation strategy would seem to have paid off, although we should emphasize the important caveat that one should never jump to conclusions before the period of measure (in this case one year) is through. We do, after all, live in a world of uncertainty (this year proving to be more so than ever) and so we should rightfully expect that anything can happen.
