The S&P 500 (INDEXSP:.INX) is not exactly under-performing yet. The market index remains up by 9 percent this year to-date. However, of the eleven industry sectors that make up the S&P, three are clearly killing its potential. In a historic event for the index, sectors belonging to energy, financials and telecoms are lagging by an average 7.7 percent.
It is the greatest gap in nearly three decades, analysts point out. Fundstrat Global Advisors looked at data dating back to 1990. In their research, they uncovered that the difference between the S&P 500’s best and worst performing sectors is the poorest in 26 years.
Before 2017, the largest chasm between the best and poorest S&P 500 (INDEXSP:.INX) segments was 15.5 percent. That was in 1991. While this year’s figure clearly is as bad, the gap remains the biggest the index has seen in a while.
The last thirty years have never seen telecoms and energy sectors starring in the bottom three at the same time. This not only adds to the list of unusual market events, but hints at the absurdity of the of the current market too. That is opinion of Tom Lee, an analyst at Fundstrat.
“Never have we seen Financials, Telecoms and Energy [in] the bottom 3 at the same time,” Lee reported. This “speaks to the peculiarity of this market — after all, why would Telecoms and Energy both be the worst performer?”
It all makes sense for others, though. S&P Global’s Erin Gibbs claims that there is a big connection between the three sectors. That is, they are cooling off from the massive momentum seen in recent months. In particular, Gibbs says that the Christmas quarter took its toll on several S&P 500 sectors.
Everything from likely fed hikes, to global relationship and Donald Trump optimism had the current bottom 3 segment surging in recent months. What the market sees now, according to Gibbs, is massive change in opinions. While these sectors had major runups coming into the current year, optimism is dwindling.
U.S. politics crushes S&P 500
“We’re really coming down to reasonable valuations and reasonable pricing,” Gibbs insisted. A look at the dry energy stocks indicates a market response to falling oil values. Financial stocks are clearly suffering from the mass optimism that came from Trumps election promises. T
The U.S. President’s assurances, especially those regarding business and tax reform, are nowhere close to being realized, it seems. The market is clearly pulling back on its pre-inauguration excitement, no longer certain about the future of American markets.
Yet things are not all bad for the S&P 500. Tech giants are pulling much of the index’s weight. The likes of Alphabet, Facebook, Amazon and Netflix sprint far ahead of the index. For now, the only thing worth hoping for is some stability and confidence in U.S. politics. If a degree of political certainty can be added to predictions, the index should climb significantly in the near term.
The Standard and Poor’s 500 (INDEXSP:.INX) is a U.S. market index that considers the market caps of 500 large corporations. These stocks are listed on the NASDAQ or NYSE. The parts and weightings of the S&P 500 are based on S&P Dow Jones Indices.