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Which Sectors Are Set to Outperform the Market?

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This headline-grabbing bull market or ours is fast approaching its second birthday in March and, with that in mind, James Stack of InvesTech Research recently addressed how sector leadership can change under various market and economic conditions.

Stack offered the following diagram, which shows the three stages of a stock market cycle, along with the sectors that have historically outperformed during each stage:

Since we are now about two years into this bull market, it’s likely we are entering Stage II on this graph, which is illustrated by the shaded portion of the line. Recent sector performance seems to support that view.

In the chart below, the white highlighted areas show were the various sectors have outperformed the “500” for the period. There are some apparent transitions in leadership now underway.

Specifically, the Stage I sectors are still holding up, but recent performance has been mixed. However, the Stage II sectors are now where strength is emerging while Stage III sectors continue to underperform.

POSITION:  No positions in stocks mentioned.