Sector Winners and Losers week ending 3/5

2021年3月7日

If you kept your eyes only on big tech and growth stocks, you might have missed that many sectors had fairly good advances this week. The sector chart supports the thesis that there is an outsized rotation in progress that is presenting as a correction, but that there is still a level of support in the broader equities market.

The top two sectors, Energy (XLE) and Financials (XLF), never dipped into negative territory even with Thursday's broad sell-off.

The other cyclical Industrials (XLI) and Materials (XLB) also performed well for the week. Materials was leading for the week at the end of Tuesday, but backed off a bit later in the week.

There was caution visible in the sectors as Utilities (XLU) and Consumer Staples (XLP) advanced.

Investors moved from sectors that are more exposed to pressures from inflation and higher yields. Consumer Discretionary (XLY) and Technology (XLK) were the hardest hit among the sectors. Real Estate (XLRE) is also at the bottom of the list.

At center stage is the bond market sell-off that is driving higher yields. Interest rates that are based on the yields will make borrowing costs higher. Add to that fears of higher inflation would bring interest rate adjustments earlier than initially expected. The higher interest rates benefit big banks that drive the Financials sector higher. But it depresses the net present value that was priced into high growth sectors like Technology.