You can see a lot just by looking, Yogi Berra once advised. True for baseball, true for the stock market, where the 10 sectors that comprise the S&P 500 are dispensing signals about investor sentiment.
Much has been made of the stock market’s resilience in the face Hurricane Katrina’s wrath, and price tag. Ill-informed or not, the S&P 500’s bounce off of the recent low of August 30 has impressed some observers of the investing scene. Indeed, all ten sectors show gains so far in September. On a year-to-date basis, however, the stock market is a divided realm.
Let’s start with the winners based on 2005 performance through September 7: energy, consumer staples, healthcare, and utilities. Now compare that to sectors with year-to-date losses: materials, industrials, consumer discretionary, financials, and information technology. Notice a trend? Mr. Market’s placing his bullish bets on energy and commodities, and the traditionally defensive sectors of consumer staples and healthcare. The selling’s concentrated on groups that normally do well in periods of robust economic growth.
Is this what a bull market looks like? Perhaps not. Consider that in 2003, a year when the price of the S&P 500 jumped 26.4%, all ten sectors showed handsome gains on the year too. History repeated itself in 2004, when the S&P’s price rose a more-modest but still-respectable 9.0%. Once again, all ten sectors followed suit in 2004 with gains.
All of which contrasts with the mixed year-to-date results for the ten sectors in 2005. Is this a sign of behind-scenes-stress in the S&P 500?
It’s easy to be anxious these days, in no small part because of energy. “There is no doubt that this is going to be a very tough winter season for the American economy (and) for American homeowners,” U.S. Energy Secretary Sam Bodman said today in an interview on the “Fox & Friends” television news program, Reuters reports. That comes a day after the Energy Department warned that natural-gas heating bills could climb more than 70% for some part of the country, the news service added.
We don’t claim to have a crystal ball, but we can still ask questions, including this one: Does all this sound like the backdrop for sparking the next broad-based bull market in stocks?