Before last week, when the S&P 500 last made a record high in July, breadth was incredibly narrow as only two sectors – Technology and Communication Services (driven mostly by ‘tech-like’ stocks) – had outperformed the S&P 500 on a YTD basis. In the latest leg of the rally, breadth has broadened, and as of last Friday, the number of sectors outperforming the S&P 500 on the year has doubled from two to four. While Technology and Communication Services remain on the outperformer list, Utilities and Financials have also joined. Utilities is not only a new entry on the outperformer list but it has also moved to second overall, trailing only Technology (27.4% vs 25.6%).
The chart below compares the paths that Technology and Utilities have taken on a YTD basis along with the performance of the S&P 500. While the two sectors have similar returns, they have mostly achieved those gains at alternating points in the year. In the first two months of 2024, Technology came out of the gate strong while Utilities started the year with modest declines.As March rolled around, Tech’s momentum stalled while Utilities picked up. In early summer, we saw a similar trend to the start of the year play out until early July when the two sectors’ roles started to reverse again.
The opposite paths of the two sectors stick out much more when we look at their relative strength versus the S&P 500 this year. For each sector, a rising line indicates outperformance versus the S&P 500 while a falling line indicates underperformance. For almost all of this year, the two series have been mirror images of each other. So even as they sit at number one and two in terms of YTD performance, their paths couldn’t have been much more different.What makes the different paths even more notable is that, as last week’s deal between Microsoft () and Constellation () illustrates, both sectors have been riding the same wave to the top of the sector leaderboard.
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Opposites On Top
