The market is hitting new highs again, but the question of if the Financials sector is doing the same depends on whether or not you include dividends. While dividends matter for the top-ranked Financials sector, current dividend yield is not getting any respect, making Yield the bottom-ranked factor.
Sectors: Financials has topped the rankings of our Sector Benchmark ETFs for all but two of the past 15 weeks. The sector surged in the month after the election, then consolidated its gains for about two months, and then broke out to new nine-year highs this week. This was the hardest-hit sector during the financial crisis, and it has to climb another 9% before declaring an all-time high on a price basis. However, on a dividend-adjusted basis, it is already more than 13% above its 2007 peak, proving once again that dividends matter. Technology climbed to second place a week ago and is holding down that spot again today. Materials held the top spot for the two weeks that Financials relinquished its leadership role, and it resides in third place again this week. Consumer Discretionary and Health Care swapped positions, producing the only relative-strength changes in the sector rankings this week. Telecom and Energy both succeeded in shedding their negative momentum scores and now sit precariously on the plus side of the line.
Factors: After eight weeks of absolutely no change in the relative strength of the top three Factor Benchmark ETFs, there is actually a small change to report today. While High Beta continues to be the undisputed champion, Value moved ahead of Small Size to claim the #2 spot. There were also minor changes further down the rankings, with Fundamental and Momentum swapping places and Quality and Growth doing the same. Last week, there was a near five-way tie for second place, but this week there is much more dispersion visible in the rankings and a more linear falloff in the momentum scores. Yield gets no respect and remains the laggard, sitting on the bottom for a fifth week.
