In today's issue of the 1-Minute Market Report I examine the asset classes, sectors, and groups that are leading the charge for this strong market rally. I highlight three sectors in particular - Consumer Discretionary, Tech, and Communications Services. These sectors are where the big money is going, after leading the market lower last year.
The S&P 500 rally.
This chart highlights the 15.4% bounce from the October 12 low through today's close. This is the strongest rally we've seen since the 17% move from June 16 to August 16 of last year.
Major asset class performance.
Here is a look at the performance of the major asset classes, sorted by their year-to-date returns. I also included the gains from their respective 52-week lows for additional context.
The long-suffering Blockchain asset class is leading the way higher this year. This asset class includes companies from all industries that have significant exposure to blockchain technology. It does not include the coins themselves.
The tech-heavy NASDAQ is enjoying a major rebound after a terrible performance last year. I will drill down into the Tech sector later in this report.
The Asia 50 index of very large Asian firms is doing well, as China's economy begins to open up after several months of Covid-related lockdowns.
Equity sector performance
For this report I use the expanded sectors as published by Zacks. They use 16 sectors rather than the standard 11. This gives us added granularity as we survey the winners and losers.
Consumer Discretionary, Autos, Retail, and Construction are leading the way higher this year. Tech and Communications Services are close behind.
Consumer Staples, Healthcare, and Utilities are struggling as investors rotate from defensive names to growth names. Details to come.
Equity group performance
For the groups, I separate the stocks in the S&P 1500 Composite Index by shared characteristics like growth, value, size, cyclical, defensive, and domestic vs. foreign.
The top 7 stocks in the S&P 1500 by market cap (big tech names, like Apple, Microsoft, Alphabet) are seeing a strong up move. This was by far the worst performing equity group last year.
Defensive names are in last place, as the rotation to growth continues this year.
The 10 best performing Consumer Discretionary stocks YTD
The 10 best performing Tech stocks YTD
The 10 best performing Communications Services stocks YTD
Final thoughts
This year's market rally is a big deal. Investor confidence was boosted by the CPI report and comments from several Fed Governors regarding the possibility that the next rate hike won't be as big as the last few.
At this point it looks fairly certain that this spike in inflation is behind us. That takes some pressure off of the Fed, and allows them to slow the pace of rate hikes going forward. When investors begin to anticipate that the next move in rates will be lower, I think it will be safe to say that the bottom of this bear market is in.
That may be happening already.