Why Energy, Financials and Health Care ETFs Have Year-Over-Year Losses
27 August 2010 at 12:11 pm by Gary Gordon
In the best of times, stock prices of different economic segments behave differently. So it isn’t surprising to find Sector ETFs travelling unique paths in ”challenging times.”
For instance, if we are heading for the dreaded “double dip,” one might expect relative strength in consumer staples and health care. Staples (XLP) is currently showing relative strength, yet Health Care (XLV) is currently demonstrating relative weakness. This is hardly typical for an economy that’s destined for recession.
Or, if we are merely experiencing a “soft patch” in the middle of our recovery, energy and basic materials should be flying up the relative strength charts. Basic Materials (XLB) is making a move, but Energy (XLE) is still cleaning the proverbial toilet bowl.
Or, in a still wilder notion, if we are gearing up for strong economic expansion, financials and transportation stocks could be killing it. Transportation (IYT) is offering some signs of strength, while Financials (XLF) is visiting 52-week lows.
Perhaps one can make a case that the current economy has no precedent. You know… “this time it’s different.” And… sector investments that performed well in previous cycles mean nothing in the “New Normal.”
However, I am less willing to chalk everything up to a “New Economy” or a “New Normal.” I’d rather visit a few data ponits to see what they may or may not share in common.
Year-over-year price changes for the 10 major sectors show gains for all but 3: (a) Financials, (b) Energy, (c) Healthcare. Is there something that all 3 of these economic segments share with one another? Indeed, government regulation from FINREG to drilling moratoriums/cap-n-trade to ”health reform” figures prominently in the mind of the investing public.
I’m not going to debate the benefits or drawbacks of the government’s involvement. Nevertheless, it seems foolish to ignore the adverse impact that regulatory changes are having on investment outcomes.
| Approximate Year-Over-Year Performance For Sector ETFs | |||||
| Approx % | |||||
| Consumer Discretionary Select SPDR (XLY) | 15.4% | ||||
| iShares DJ Transports (IYT) | 14.8% | ||||
| Industrials Select Sector SPDR (XLI) | 12.9% | ||||
| Consumer Staples Select SPDR (XLP) | 7.1% | ||||
| Utilities Select SPDR (XLU) | 5.2% | ||||
| Materials Select SPDR (XLB) | 4.4% | ||||
| Technology Select SPDR (XLK) | 4.1% | ||||
| Energy Select Sector SPDR (XLE) | -0.6% | ||||
| Healthcare Select Sector SPDR (XLV) | -1.2% | ||||
| Financials Select Sector SPDR (XLF) | -7.0% | ||||
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Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.
