As we approach the end of the year, many will be making their plans and predictions for the year ahead. The latter part of this year has been rather volatile but there are still areas of the market which remain quite strong and other areas you may want to hide from. Today we will review some of what is hot and what is not.
Healthcare is by far the biggest headline for strength. Healthcare stocks have mostly been on fire, and for this year it remains the strongest sector of the market by more than 5 percentage points. Though it is the strongest area of the market this year, the sector itself has had many years that have come in stronger than this year. 14 other years to be exact since 1990 where the healthcare sector has seen better performance than this year. So, while investors have their eyes (and capital) glued to the healthcare space, the fact that this is more of an average year for the sector might offer some clues as to the overall strength of the markets.
Utility stocks are also a focus in the latter part of the year as the sector has maintained most of it's strength for the year overall. For the year the sector is fighting it out with the Consumer discretionary sector for second place, higher on the year by almost 6%. But, the utility stocks may not be done yet as they are currently trading at new 52-week highs.
On the downside we have materials which have lost double digits on the year so far. With all the trade war rhetoric and the back and forth tariffs on their products, the materials have simply fallen out of favor overall. Going back to 1990 there have been only 3 other years with worse performance than 2018.
Energy is also a weak spot overall thanks mostly to the recent slide in the price of oil. Oil has broken a record of it's own this year with the fastest ever slide from 52 week highs to 52 week lows, accomplishing this in only 30 days.
While some may look at the strong sectors as opportunity and the weak sectors as a place to avoid, others will see healthcare as overbought and energy as a discount, and that is what makes a market!