Sept: How The Sectors Stood Up

	Sector	25 Year Sept Mean		Sector	Sep-12
1	Health Care	1.21%	1	Health Care	4.52%
2	Real Estate	0.99%	2	Natural Resources	4.31%
3	Telecom	0.76%	3	Telecom	3.77%
4	Utilities	0.74%	4	Financials	3.71%
5	Consum Staples	0.43%	5	Consumer Discret	2.66%
6	Technology	0.33%	6	S&P 500 Index TR	2.58%
7	Energy	0.24%	7	Energy	2.40%
8	Financials	0.09%	8	Utilities	2.03%
9	Consum Discret	-0.58%	9	Consumer Staples	1.37%
10	Natural Resources	-0.09%	10	Industrials	1.15%
11	S&P 500 Index TR	-0.28%	11	Technology	1.08%
12	Industrials	-1.43%	12	Real Estate	-1.38%

 

As always I thought it would be interesting to see how various sectors performed in the month of September versus their trailing twenty-five year average mean performance.  September was a very difficult month to place faith in the historical data.  There have been many negative historical events in the month that were just too hard for the markets to overcome.  That being said we did see the health care sector live up to its stellar twenty-five year historical performance.  It was the leading sector, on average, in the month of September between the years 1987 and 2011, and once again led the way in September 2012.  The only major surprise was in the real estate sector.  Not only has real estate been a strong performer over the last twenty-five years in the month of September, but also over the last 20, 15 and 10 years that I examined. 

Natural resources had two things working for them in the month that helped that sector buck its historically weak twenty-five year trend.  We had the fed decision to go ahead with QE3 which helped   send gold prices higher and we also had a surge in oil prices.  Just as the health care sector performed right in line with its twenty-five year historical performance so too did the telecom sector.  The rest of the sectors, with the exception of the energy sector, jockeyed positions a bit, but nothing out of the ordinary.

Obviously we live in a world where outside events can alter the markets.  However, I have found it helpful to have a historical perspective when entering each month. 

Thank you and good luck everyone!

 

Jon R. Orcutt, founder of Allocation For Life, is an asset allocation strategist and author of “Master the Markets with Mutual Funds: A Common Sense Guide To Investing Success”; Manager/Creator of the AFL Model Portfolios available for members of Allocation For Life in self-directed accounts at Folio Investing

http://www.allocationforlife.com/

Sept,Q3,YTD S&P 500, Asset Class & Sector Performance

Even with the sluggish end to the quarter the market was still able to post solid gains both for the month of September and the entire quarter.  The breadth of the rally impressed me.  Starting in August we started to see asset classes, such as small caps, take a leadership position.  This is noteable because we have been in a two year narrow rally concentrated in large caps.

The most impressive move in the quarter was found in "Gold & Precious Metals".  At AFL we were prepared for this.  In fact, on July 26th I sent a note to newsletter subscribers making them aware of the fact that I was making a change in my models.  That change was the addition of the Market Vectors Gold Miners ETF (GDX).  We ended up locking in a 27.25% gain on GDX yesterday.  To find out what other changes we made recently and positions we own in the AFL models then please become a newsletter subscriber.  Subscribers to the AFL newsletter receive direct access to invest in all of our models in self-directed accounts at Folio Investing.

As of the close on 9-28-12	Sept	Q3	YTD
S&P 500 Index Total Return	2.58%	6.35%	16.44%
Asset Class Category Average Performance
Large Cap Value	2.49%	5.98%	13.46%
Mid Cap Value	2.21%	5.55%	12.75%
Small Cap Value	2.74%	4.97%	11.93%
Foreign Large Cap Value	3.02%	6.76%	9.22%
Foreign Small/Mid Cap Value	4.48%	8.05%	13.41%
Large Cap Growth	2.30%	6.14%	15.99%
Mid Cap Growth	1.87%	4.64%	16.44%
Small Cap Growth	2.82%	5.14%	13.31%
Foreign Large Cap Growth	3.41%	6.67%	11.89%
Diversified Emerging Markets	4.96%	6.77%	11.37%
Gold & Precious Metals	12.84%	22.84%	5.18%
Real Estate	-1.38%	0.60%	14.97%
Broad Basket Commodities	1.08%	9.89%	5.31%
Sector Category Average Performance
Technology	1.08%	4.65%	15.13%
Consumer Discretionary	2.66%	6.33%	20.41%
Financials	3.71%	6.78%	19.38%
Telecommunications	3.77%	9.88%	15.56%
Industrials	1.15%	2.97%	10.50%
Utilities	2.03%	2.80%	7.69%
Natural Resources	4.31%	9.37%	4.48%
Real Estate	-1.38%	0.60%	14.97%
Health Care	4.52%	6.71%	23.15%
Consumer Staples	1.37%	3.76%	14.10%
Energy	2.40%	8.39%	2.36%
Regions
Europe Stock	3.48%	8.11%	13.17%
China Region	2.93%	5.08%	5.54%
Japan Stock	1.33%	-0.99%	3.22%
Latin America	4.16%	5.05%	4.82%

 

Jon R. Orcutt, founder of Allocation For Life, is an asset allocation strategist and author of “Master the Markets with Mutual Funds: A Common Sense Guide To Investing Success”; Manager/Creator of the AFL Model Portfolios available for members of Allocation For Life in self-directed accounts at Folio Investing

http://www.allocationforlife.com/

October Historical Sector Analysis

This month’s historical sector analysis for the upcoming month of October shows pretty good strength across the board for the market.  After removing the high and low returns for statistical analysis, the S&P 500 TR (SPY) has been able to achieve a positive mean return for the trailing 25, 20, 15 and 10 years in the month of October.  One clear standout is the technology sector.  The tech sector has achieved the highest mean return in October over the last 25, 20, 15 and 10 years.  With much anticipated initial sales numbers for the iPhone 5 expected in October, we could see this historical trend continue.

Any sector that was able to post a positive mean return for the trailing twenty-five year period is impressive.  The markets have experience two vicious downturns in the month of October and only one could be removed for analysis.  The first was the October crash of 1987 and the second was the credit crash of October 2008.  Real estate securities have really struggled in the month of October.  They have finished with a negative mean return in three of the four time periods examined, and next to last in the trailing ten year period.  One thing I have been discussing this year in my monthly newsletter is that we have been noticing a trend between the technology sector and consumer discretionary stocks.  Over the last twenty years you will notice as the technology sector has led the way, consumer discretionary stocks have been right near the top as one of the best sector performers.  I believe this illustrates the consumers desire to spend their discretionary income on technological advances.  We’ve all seen this trend.  How many times have we known someone that has trouble paying their bills, yet owns the latest smartphone or a mammoth sized new television?  We expect this trend to continue as we enter the holiday shopping season.

Oct	Consum Discr	Health Care	Energy	Financials	Consum Staples	Technology
1987	-27.44%	-23.43%	-24.81%	-18.53%	-22.56%	-23.77%
1988	1.07%	0.79%	0.68%	0.86%	4.65%	-3.08%
1989	-5.08%	-0.67%	-2.94%	-5.90%	-1.01%	-2.81%
1990	-1.25%	4.39%	-8.82%	-4.58%	2.37%	-1.31%
1991	2.26%	6.25%	2.27%	2.94%	0.03%	4.89%
1992	3.06%	2.32%	-2.13%	3.25%	1.08%	5.18%
1993	3.46%	4.36%	-0.86%	-2.51%	3.77%	-0.86%
1994	0.75%	0.00%	2.77%	-1.63%	1.88%	5.95%
1995	-2.05%	-0.15%	-5.71%	-1.49%	0.16%	-0.66%
1996	-0.19%	-3.95%	6.18%	5.02%	1.85%	-1.00%
1997	-1.97%	-3.13%	-3.37%	-1.07%	-2.26%	-8.94%
1998	10.45%	4.32%	3.79%	7.32%	10.56%	7.47%
1999	4.89%	3.97%	-4.92%	10.56%	3.18%	11.31%
2000	0.31%	-2.05%	-7.38%	0.17%	6.21%	-10.83%
2001	2.35%	4.42%	9.61%	-2.14%	1.37%	15.99%
2002	3.77%	4.55%	3.69%	6.52%	4.72%	16.52%
2003	7.37%	1.18%	3.41%	7.25%	4.25%	10.34%
2004	3.27%	-1.87%	-0.19%	1.46%	1.24%	5.91%
2005	-1.22%	-2.39%	-8.06%	1.06%	-2.50%	-2.06%
2006	5.79%	2.72%	4.75%	2.46%	2.15%	2.68%
2007	1.06%	2.84%	6.20%	0.53%	2.93%	6.08%
2008	-20.46%	-14.44%	-22.09%	-16.86%	-15.54%	-18.21%
2009	-3.46%	-4.81%	-1.43%	-4.92%	0.09%	-3.44%
2010	5.07%	2.08%	4.45%	2.30%	3.87%	5.78%
2011	12.13%	6.42%	16.45%	12.49%	6.94%	12.36%
# Of Up Years	16	15	12	15	20	13
Mean	0.84%	0.47%	-0.87%	0.46%	1.37%	1.77%
Standard Deviation	5.87	4.50	6.80	5.63	4.42	7.95
Trailing 10yr Mean	2.71%	0.54%	1.60%	2.08%	2.09%	4.71%
Trailing 15 yr Mean	2.90%	0.91%	0.81%	2.42%	2.48%	4.05%
Trailing 20 Yr Mean	2.37%	0.80%	0.60%	1.90%	2.27%	3.40%
Oct	Telecom	Nat Resources	Real Estate	Utilities	Industrials	S&P 500
1987	-13.44%	-25.51%	-4.36%	-8.70%	-29.28%	-21.54%
1988	2.00%	1.46%	0.81%	2.30%	0.84%	2.78%
1989	-3.15%	-3.45%	-1.62%	0.23%	-6.63%	-2.32%
1990	0.77%	-6.27%	-1.03%	4.80%	-0.07%	-0.43%
1991	4.33%	2.31%	-0.81%	1.12%	4.11%	1.34%
1992	1.53%	-2.06%	0.67%	-0.48%	2.07%	0.06%
1993	3.35%	1.09%	-0.40%	-0.28%	3.80%	2.07%
1994	2.33%	0.55%	-3.45%	0.88%	1.52%	0.94%
1995	-2.54%	-4.94%	-2.76%	0.62%	-1.55%	-0.36%
1996	-1.28%	4.45%	2.40%	3.41%	0.93%	2.76%
1997	-3.94%	-5.20%	-2.67%	-0.95%	-5.82%	-3.34%
1998	7.79%	3.23%	-1.80%	2.21%	9.53%	8.13%
1999	11.99%	-4.21%	-2.26%	5.20%	2.18%	6.33%
2000	-4.96%	-5.10%	-4.38%	-2.35%	6.12%	-0.42%
2001	0.04%	6.57%	-3.09%	-0.77%	4.23%	1.91%
2002	17.68%	2.06%	-4.18%	4.57%	2.44%	8.80%
2003	8.28%	4.17%	1.86%	2.59%	8.46%	5.66%
2004	6.05%	0.52%	4.97%	4.08%	3.22%	1.53%
2005	-2.89%	-7.42%	-2.30%	-5.53%	-0.89%	-1.67%
2006	4.84%	4.74%	5.73%	5.08%	4.45%	3.26%
2007	1.95%	6.35%	1.82%	6.23%	1.92%	1.59%
2008	-21.21%	-22.77%	-29.72%	-13.33%	-18.02%	-16.79%
2009	-5.97%	-0.56%	-4.28%	-3.50%	-5.96%	-1.86%
2010	2.98%	4.74%	4.16%	2.95%	4.93%	3.80%
2011	6.54%	16.97%	13.71%	6.14%	15.44%	10.93%
# Of Up Years	16	14	9	16	17	16
Mean	1.16%	-0.86%	-0.74%	1.03%	0.95%	1.03%
Standard Deviation	5.57	6.39	3.05	3.65	5.83	5.01
Trailing 10yr Mean	2.72%	1.83%	0.97%	2.05%	2.32%	2.64%
Trailing 15 yr Mean	2.52%	0.77%	-0.49%	1.52%	2.68%	2.59%
Trailing 20 Yr Mean	2.01%	0.50%	-0.55%	1.33%	2.31%	2.18%

 

Trailing period performance:

	25 Year	20 Year	15 Year	10 Year
1	Technology	Technology	Technology	Technology
2	Consum Staples	Consum Discret	Consum Discret	Telecom
3	Telecom	Industrials	Industrials	Consum Discret
4	Utilities	Consum Staples	S&P 500 Index TR	S&P 500 Index TR
5	S&P 500 Index TR	S&P 500 Index TR	Telecom	Industrials
6	Industrials	Telecom	Consum Staples	Consum Staples
7	Consum Discret	Financials	Financials	Financials
8	Health Care	Utilities	Utilities	Utilities
9	Financials	Health Care	Health Care	Natural Resources
10	Real Estate	Energy	Energy	Energy
11	Natural Resources	Natural Resources	Natural Resources	Real Estate
12	Energy	Real Estate	Real Estate	Health Care

 

ETF ideas for each sector:

Consumer Discretionary Select Sector SPDR (XLY)

Vanguard Health Care ETF (VHT)

Financial Select Sector SPDR (XLF)

Technology Select Sector SPDR (XLK)

SPDR S&P Telecom (XTL)

iShares Cohen & Steers Realty Majors (ICF)

Consumer Staples Select Sector SPDR (XLP)

Energy Select Sector SPDR (XLE)

Utilities Select Sector SPDR (XLU)

SPDR S&P Global Nat Resources (GNR)

Industrial Select Sector SPDR (XLI)

S&P 500 Index (SPY)