Helping Self-Directed Investors Succeed Blog - Three Sectors Outperforming The Broader Market as of Jan 18th, 2019

Three Sectors Outperforming the Broader Market as of Jan 18th, 2019

January 18th, 2019

US Stocks are trying to stage a respectable recovery after enduring a very sharp selloff last month. The S&P 500, in December 2018, flirted near bear market territory and caused plenty of concerns for investors. Readers of our InvesTrak - E-Newsletter will realize the cautious tone we have been taking over the past few months, especially considering the weakness in breadth we first noticed in September/October 2018.

In the latest ongoing rally, the beaten down energy sector SPDR ETFS have logged solid upside in January but those gains are coming from extremely painful losses some of these ETFS handed down to investors. This month's top sector SPDR gainer has been Oil and Gas Equipment Services SPDR ETF - XES which has risen a staggering +23.75%. The Oil and Gas Exploration Sector SPDR ETF - XOP is the second best performer turning in a solid gain of +19.15%.

While it could be tempting to jump in to these high-flying ETFS now, self-directed investors must remember that the bounce in these sectors has been from very deeply oversold conditions and after such a quick run-up a period of consolidation cannot be ruled out.

But from a relative strength perspective, these are the 3 Sector SPDR ETFS which are standing out:

  • S&P Health Care SPDR ETF - XLV
  • S&P Software and Services Sector SPDR ETF - XSW
  • S&P Real Estate Sector SPDR ETF - XLRE

At the end of 2018 after the market correction and late rally, the Software & Services sector was one of the few sectors that were still showing positive year-to-date gains. Picking up from where it left the previous year, XSW is continuing to show better price performance versus the broader market. XSW is up +10.65% in January. Self-directed investors may want watch this sector closely especially with the earnings season underway.

XLV has gained only +4.13% for the year so far and health care is often seen as a defensive play in volatile market conditions. It is very noteworthy that this sector is outperforming the broader market.

XLRE provides a broad exposure to US Real Estate sector which was carved out of the financial sector a while ago. This ETF is up +5.35% for the year and has shown respectable price action this past week. If the Fed slows down on further interest rate increases this sector could stand to gain.

The major benchmarks have rebounded nicely but from a technical perspective their charts need some more work. Self-directed investors may want to keep an eye on S&P 500's price action this up coming week before deciding how to proceed.

We wish our readers a Happy New Year 2019! Good Luck and Happy Investing!

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