Thursday, November 1, 2012

Oct '12: How The Sectors Stood Up

Sectors, in the month of October, performed poorly when compared to their trailing 25, 20, 15 and 10 year trailing performance.  Technology stocks had been the previous leader for all of these trailing periods examined between the years 1987 and 2011.  In October 2012, tech stocks were the biggest dog.  Obviously the market was cut a little bit short by Sandy, but I do not think it really would have helped much.  The overall market struggled in October, and most techonolgy portfolios were being weighted down by Apple (AAPL) and Google (GOOG).  They captured the headlines, and overshadowed some very good earnings reports in the tech sector from companies such as Akamai (AKAM), 3-D Systems (DDD) and many others.

Based on trailing historical performance I weighted the AFL Cyclical Sector Model I manage evenly in the following ETFs:

Consumer Discretionary Select Sector SPDR (XLY)

Technology Select Sector SPDR (XLK)

Consumer Staples Select Sector SPDR (XLP)

Industrial Select Sector SPDR (XLI)

S&P 500 Index (SPY)
My model finished the month down 2.20% versus the S&P 500 which finished the month down 1.85%.  Here is a look at how each sector stood up to its trailing historical performance:
Oct-12 25 Year 20 Year 15 Year 10 Year
1 Financials Technology Technology Technology Technology
2 Utilities Consum Staples Consum Discret Consum Discret Telecom
3 Industrials Telecom Industrials Industrials Consum Discret
4 Real Estate Utilities Consum Staples S&P 500 Index TR S&P 500 Index TR
5 Consumer Discret S&P 500 Index TR S&P 500 Index TR Telecom Industrials
6 Consumer Staples Industrials Telecom Consum Staples Consum Staples
7 Natural Resources Consum Discret Financials Financials Financials
8 Energy Health Care Utilities Utilities Utilities
9 S&P 500 TR Financials Health Care Health Care Natural Resources
10 Telecom Real Estate Energy Energy Energy
11 Health Care Natural Resources Natural Resources Natural Resources Real Estate
12 Technology Energy Real Estate Real Estate Health Care

Jon R. Orcutt is the founder of Allocation For Life, Author of The Allocation For Life Investment Newsletter, Author of "Master The Markets With Mutual Funds: A Common Sense Guide To Investing Success" and manager/creator of the AFL Models available to Allocation For Life subscribers at Folio Investing.