Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       
 
 
 
Blog Home
Bob Carey
Chief Market Strategist
Click for Bio

Follow Bob on Twitter Follow Bob on LinkedIn View Videos on YouTube
 

  Top-Performing Subsectors in the S&P 500 Index
Posted Under: Sectors

 
View from the Observation Deck

  1. Today's blog post is for those investors who want to drill down below the sector level to see what is performing well in the stock market.
  2. The S&P 500 Index is currently comprised of 11 sectors and 126 subsectors, according to S&P Dow Jones Indices.
  3. Of the 15 subsectors featured in the chart, 12 are classified as either Consumer Discretionary, Health Care or Information Technology. 
  4. As of today, the most heavily weighted sector in the S&P 500 Index was Information Technology at 20.3%, followed by Health Care at 15.7%, according to Bloomberg. Consumer Discretionary ranked fifth at 9.9%. 
  5. The 15 top-performing subsectors in the chart posted total returns ranging from 18.59% (Data Processing & Outsourced Services) to 49.00% (Independent Power Producers & Energy Traders).
  6. For comparative purposes, from 12/29/17-12/11/18, the S&P 500 Health Care Index was the top-performing sector index, with a total return of 11.82%, according to Bloomberg. The S&P 500 Consumer Discretionary Index and S&P 500 Information Technology Index were up 5.62% and 5.01%, respectively, over that period. Only five of the 11 sectors were in positive territory. The S&P 500 Index posted a total return of just 0.46%. 
  7. There are a growing number of packaged products, such as exchange-traded funds, that feature index subsectors.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 is a capitalization-weighted index comprised of 500 stocks (currently 505) used to measure large-cap U.S. stock market performance, while the S&P sector and subsector indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector or industry.

Download a PDF of this post, please click here.
Posted on Thursday, December 13, 2018 @ 2:20 PM • Post Link Share: 
Print this post Printer Friendly
  S&P 500 Index Earnings & Revenue Growth Rate Projections
Posted Under: Broader Stock Market

 
View from the Observation Deck  
  1. On 12/10/18, the S&P 500 Index closed the trading session at 2,637.72, 10.0% below its all-time high of 2,930.75 set on 9/20/18, according to Bloomberg. 
  2. For the market to trend higher, we believe that corporate earnings will need to grow, and perhaps the best catalyst for growing earnings is to increase revenues.
  3. From 1926-2017 (92 years), the S&P 500 Index posted an average annual total return of 10.2%, according to Ibbotson & Associates/Morningstar. 
  4. As indicated in the table, Bloomberg's 2019 and 2020 consensus year-over-year (y-o-y) earnings growth rate estimates for the index were 9.3% and 10.2%, respectively, as of 12/7/18. 
  5. Four of the 11 major sectors that comprise the index reflect double-digit y-o-y earnings growth rate estimates for 2019, and that number jumps to six in 2020. 
  6. Bloomberg's 2019 and 2020 consensus y-o-y revenue growth rate estimates for the S&P 500 Index were 5.3% and 4.7%, respectively, as of 12/7/18.
  7. Five of the 11 major sectors reflect y-o-y revenue growth rate estimates of 5.0% or more for 2019, compared to four for 2020.

This chart is for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is a capitalization-weighted index comprised of 500 stocks (currently 505) used to measure large-cap U.S. stock market performance, while the 11 major S&P 500 Sector Indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector.

Download a PDF of this post, please click here.
Posted on Tuesday, December 11, 2018 @ 12:46 PM • Post Link Share: 
Print this post Printer Friendly
  US Stock Markets Ended December 7, 2018
Posted Under: Weekly Market Commentary

 
Equities had their worst week since March returning -4.5%. Trade news continues to dominate headlines and drive equity market returns. Over last weekend, U.S. President Trump and Chinese President Xi had productive trade talks at the G20 summit in Argentina. As a result, equity markets rallied last Monday on news the U.S. would maintain its current 10% tariffs for up to 90 days and China would work to reduce IP theft and their trade imbalance. The reprieve was short lived as the S&P traded down the rest of last week. Equity markets were closed on Wednesday for a National Day of mourning in honor of President George H.W. Bush passing away. AutoZone Inc. rallied 7.5% last week after reporting earnings and strong same store sales came in higher than analyst estimates. Homebuilding stocks continued to struggle after Toll Brothers reported their first decline in sales since 2014. Housing linked names like Builders FirstSource Inc., United Rentals Inc., Skyline Champion Corp. and AT Home Group Inc. were all down over 10% last week. Financials were the worst performing sector last week. Silicon Valley Bank fell nearly 20% last week, as Walk Street is discounting the bank due to its large weight in technology loans. Insurance names Brighthouse Financial Inc. and American International Group along with financial services Jefferies Financial Group Inc. and E-Trade Financial Corp., were all down over 10% as a more risk-off posture flowed through equity markets. Looking ahead to next week, U.K. has scheduled a meaningful Brexit vote and U.S. lawmakers should accelerate a government funding bill, but all eyes and ears will remain on U.S.-China trade relations, as rhetoric from both sides are most likely to move equity markets.
Posted on Monday, December 10, 2018 @ 7:54 AM • Post Link Share: 
Print this post Printer Friendly
  US Economy and Credit Markets Ended December 7, 2018
Posted Under: Weekly Market Commentary

 
Markets are digesting mixed views on how hawkish the Federal Reserve will be in 2019. The consensus expects one more hike to wrap up 2018, but 2019 expectations are vacillating as Mr. Powell was perceived making seemingly dovish remarks in November but last week New York Fed President John Williams, generally seen as a centrist on the governor's board, said that the Fed should continue to raise rates "over the next year or so." He cited the U.S. economy "continuing to grow nicely above-trend" as support for the Federal Reserve to continue tightening monetary policy. Fed Fund futures currently price in a probability of one hike in 2018, but of late they are pricing in an approximate 33% chance of no hikes in 2019 assuming one 2018 hike. The yield curve had an inversion of the 3- and 5-year yields during the week which has investors nervous that a 2- and 10-year inversion could be forthcoming. Of no doubt, the narrowing curve has weighed on Bank sentiment as net income margin is not expected to meaningfully improve without an increase on the longer-dated yields. Oil stalled its multi-week plunge to close Friday at $52.22 per barrel from a not so long-ago October price in excess of $75 per barrel. Also affecting markets was tariff talk between China and the United States. No resolution emerged, and tariffs will continue to generate uncertainty into 2019. Major economic reports (related consensus forecasts, prior data) for the upcoming week include: Tuesday: PPI final November demand (0.0%, 0.6%); Wednesday: prior week MBA Mortgage Applications and November CPI (0.0%, 0.3%); Thursday: Prior week Initial Jobless Claims (233K, 231K); Friday: November Retail Sales (0.2%, 0.8%), November Industrial Production (0.3%, 0.1%) and December preliminary Markit US Manufacturing PMI (55.1, 55.3).
Posted on Monday, December 10, 2018 @ 7:52 AM • Post Link Share: 
Print this post Printer Friendly
  A Snapshot of Bond Valuations
Posted Under: Bond Market

 
View from the Observation Deck  
 
  1. Today's blog post is one we do ongoing so that investors can monitor fluctuations in bond prices relative to changes in interest rates.
  2. The yield on the benchmark 10-year Treasury note (T-note) rose from 2.37% at the close of 12/4/17 to 2.91% on 12/4/18, or an increase of 54 basis points (bps), according to Bloomberg. The closing low for the period was 2.34% (12/6/17), while the closing high was 3.24% (11/8/18). The all-time closing low for the yield on the 10-year T-note was 1.36% on 7/8/16, according to Bloomberg. 
  3. Since 12/4/17, the Federal Reserve ("Fed") has increased the federal funds target rate (upper bound) 100 bps, from 1.25% to 2.25%. We believe the Fed will likely raise the rate another 25 bps in December 2018. 
  4. For the 30-year period ended 12/4/18, the federal funds target rate (upper bound) averaged 3.19%, according to Bloomberg. On a historical basis, the Fed's current monetary policy is not tight. 
  5. All bond indices in the chart reflect a downward adjustment in pricing year-over-year.
  6. The combination of rising interest rates and trade tariffs have some pundits concerned that global economic growth could slow, and this outlook is likely already impacting bond prices, in our opinion. We intend to monitor these events closely.  
 
This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The ICE BofAML 22+ Year U.S. Municipal Securities Index tracks the performance of U.S. dollar denominated investment grade tax-exempt debt publicly issued by U.S. states and territories, and their political subdivisions with a remaining term to maturity greater than or equal to 22 years. The ICE BofAML Fixed Rate Preferred Securities Index tracks the performance of investment grade fixed rate U.S. dollar denominated preferred securities issued in the U.S. domestic market. The S&P/LSTA U.S. Leveraged Loan 100 Index is a market value-weighted index designed to measure the performance of the largest segment of the U.S. syndicated leveraged loan market. The ICE BofAML 7-10 Year U.S. Treasury Index tracks the performance of U.S. dollar denominated sovereign debt publicly issued by the U.S. government with a remaining term to maturity between 7 to 10 years. The ICE BofAML U.S. High Yield Constrained Index tracks the performance of U.S. dollar denominated below investment grade corporate debt publicly issued in the U.S. domestic market. The ICE BofAML U.S. Corporate Index tracks the performance of U.S. dollar denominated investment grade corporate debt publicly issued in the U.S. domestic market. The ICE BofAML Global Corporate Index tracks the performance of investment grade corporate debt publicly issued in the major domestic and Eurobond markets. 

Download a PDF of this post, please click here.
Posted on Thursday, December 6, 2018 @ 3:34 PM • Post Link Share: 
Print this post Printer Friendly
  Checking in on the 10-Largest Stocks in the S&P 500 Index
Posted Under: Conceptual Investing

 
View from the Observation Deck  
  1. We continue to receive questions about the degree to which the largest companies in the S&P 500 Index, by market capitalization (cap), are influencing the performance of the index in the current bull market.
  2. The price-only returns featured in the table are shaded in either gray or blue. The gray shaded years indicate that a broad number of stocks in the S&P 500 Index were participating in the upside of the market, while the blue shaded years indicate that the top 10 stocks garnered more favor from investors. 
  3. While the top 10 companies by market cap significantly outperformed the broader market over the past three years (2015-2017), the S&P 500 index has delivered the best results through the first 11 months of 2018.    
  4. Another way to size up the bull market with respect to market breadth is to compare the S&P 500 Index, which is cap-weighted, to the S&P 500 Equal Weight Index (not depicted in table). 
  5. From 12/31/11-11/30/18 (period featured in table), the S&P 500 Index posted a cumulative total return of 153.78% (14.40% on an average annualized basis), compared to 150.22% (14.17% on an average annualized basis) for the S&P 500 Equal Weight Index, according to Bloomberg. A slight edge for the S&P 500 Index.  
  6. The bull market, as measured by the S&P 500 Index, commenced in March 2009. From 3/9/09-11/30/18, the S&P 500 Index posted a cumulative total return of 400.34% (17.99% on an average annualized basis), compared to 490.62% (20.02% on an average annualized basis) for the S&P 500 Equal Weighted Index, according to Bloomberg. A huge win for the S&P 500 Equal Weight Index. 
  7. Those returns suggest that this bull market has been inclusive, rather than one dominated by the biggest companies, in our opinion.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is a capitalization-weighted index comprised of 500 stocks (currently 505) used to measure large-cap U.S. stock market performance. The S&P 500 Equal Weight Index is comprised of the same companies as the capitalization weighted S&P 500 Index, but each company is allocated a fixed weight, or 0.2% of the index total at each quarterly rebalance.

Download a PDF of this post, please click here.
Posted on Tuesday, December 4, 2018 @ 1:46 PM • Post Link Share: 
Print this post Printer Friendly
  US Stock Markets Ended November 30, 2018
Posted Under: Weekly Market Commentary

 
Equities surged following comments by Federal Reserve chairman Jerome Powell that the current benchmark rate was "just below" neutral, implying the central bank could be close to leaving interest rates steady. As recently as last month, Mr. Powell had said rates were "a long way" from neutral. Along with tariffs, fears of higher interest rates, which could lead to slower growth, remains another key concern for most investors. During the week, trade headlines continued to add volatility to the market in the lead up to Presidents Donald Trump and Xi Jinping meeting this weekend.  In economic news, housing numbers remained disappointing as new home sales came in under expectations for October and continued to soften. Rising costs due to material and labor shortages coupled with higher interest rates have driven down home affordability. In stock news, General Motors Co. made headlines and felt the ire of President Trump's Twitter account after announcing a 15% reduction in its North American salaried workforce and the closure of three plants. Shares of Salesforce.com, Inc. jumped following a strong quarterly announcement that resulted in 27% growth in billings as clients are integrating and signing up for additional solutions.; Workday Inc. also posted impressive results and raised guidance for the full-year on broad-based strength across regions, product line and size of client. Looking ahead, all focus will be on this weekend's dinner at the Group of 20 where Presidents Donald Trump and Xi Jinping will be in attendance. If no resolution is reached soon, 25% levies are set to be placed on Chinese goods starting January 1st. Takeaways from the meeting this weekend are likely to drive sentiment for the week ahead.
Posted on Monday, December 3, 2018 @ 8:27 AM • Post Link Share: 
Print this post Printer Friendly
  US Economy and Credit Markets Ended November 30, 2018
Posted Under: Weekly Market Commentary

 
U.S. Treasury note yields were up at the start of the week as investors favored risk assets. On Monday, the 10-year Treasury note yield had its largest one-day gain in nearly a year. Federal Reserve Chairman Jerome Powell's speech on Wednesday received mixed interpretations by investors and economists. Some viewed Chairman Powell's comments as dovish, while others believe he did not add much more new information and was merely restating the current monetary policy stance of the Federal Open Market Committee. U.S. Treasury note yields finished down on Friday with the 10-year Treasury note yield declining the most in one month since August of last year. Investors are anxiously waiting for news out of Buenos Aires as President Donald Trump and Chinese President Xi Jinping plan to meet at the G-20 summit. Last week saw a slew of economic data. Real GDP grew at a 3.5% annual growth rate in the third quarter, matching the initial estimate as well as consensus expectations. Pre-tax corporate profits grew by 3.4% in the third quarter, the fastest quarterly growth rate since the second quarter of 2014, and are up 10.3% in the past year, the largest four-quarter increase since mid-2012. New single-family home sales declined 8.9% in October to an annual rate of 544,000, missing consensus estimates. Personal income increased 0.5% and personal consumption increased 0.6% in October, both beating consensus estimates. Major economic reports (related consensus forecasts, prior data) for the upcoming week include: Monday: November Final Markit US Manufacturing PMI (55.4, 55.4), October Construction Spending MoM (0.4%, 0.0%), November ISM Manufacturing (57.5, 57.7); Wednesday: November 30 MBA Mortgage Applications (n/a, 5.5%), October ADP Employment Change (195k, 227k); Thursday: October Trade Balance (-$55b, -$54.0b), October Factory Orders (-2.0%, 0.7%), December 1 Initial Jobless Claims (225k, 234k), October Final Durable Goods (-2.4%, -4.4%); Friday: November Change in Nonfarm Payrolls (198k, 250k).
Posted on Monday, December 3, 2018 @ 8:24 AM • Post Link Share: 
Print this post Printer Friendly
  A Snapshot of Growth vs. Value Investing
Posted Under: Broader Stock Market

 
View from the Observation Deck  
 
  1. The recent correction (decline of 10.00% to 19.99%) in the stock market (S&P 500 Index) that transpired between the close of 9/20/18 through 11/23/18 impacted the performance of growth stocks more than value stocks. 
  2. From 9/20/18-11/23/18, the S&P 500 Pure Growth Index posted a total return of -13.40%, compared to -9.85% for the S&P 500 Pure Value Index, according to Bloomberg. 
  3. The S&P 500 Pure Growth Index outperformed its value counterpart in two of the six periods featured in the chart. Growth investing topped value investing for the 5-year and year-to-date (YTD) periods ended 11/27/18. This is vastly different than in our last post on 10/9/18 (click here).
  4. The returns through 11/27/18 were as follows (Pure Growth vs. Pure Value): 15-year average annualized (10.63% vs. 10.95%); 10-year average annualized (18.09% vs. 18.18%); 5-year average annualized (10.16% vs. 8.11%); 3-year average annualized (9.42% vs. 10.02%); 1-year (1.56% vs. 4.27%) and year-to-date (1.78% vs. -1.04%).
  5. As of 10/31/18, the largest sector weighting in the S&P 500 Pure Growth Index was Information Technology at 36.8%, while the most heavily weighted sector in the S&P 500 Pure Value Index was Financials at 26.2%, according to S&P Dow Jones Indices.
  6. YTD through 11/27/18, the S&P 500 Information Technology Index posted a total return of 5.19%, compared to -3.60% for the S&P 500 Financials Index, according to Bloomberg.
  7. Due to the potential escalation of the use of trade tariffs, particularly between the U.S. and China, the world's two largest economies, one of the concerns is that global growth could slow moving forward if a new trade agreement isn't forged between them. Slower growth would have more of a negative impact on growth stocks, whereas a new trade agreement could favor growth stocks, in our opinion. We will continue to monitor these events closely.  
 
This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is a capitalization-weighted index comprised of 500 stocks (currently 505) used to measure large-cap U.S. stock market performance. The S&P 500 Pure Growth Index is a style-concentrated index designed to track the performance of stocks that exhibit the strongest growth characteristics based on three factors: sales growth, the ratio of earnings change to price, and momentum. It includes only those components of the parent index that exhibit strong growth characteristics, and weights them by growth score. Constituents are drawn from the S&P 500 Index. The S&P 500 Pure Value Index is a style-concentrated index designed to track the performance of stocks that exhibit the strongest value characteristics based on three factors: the ratios of book value, earnings, and sales to price. It includes only those components of the parent index that exhibit strong value characteristics, and weights them by value score. Constituents are drawn from the S&P 500 Index. The S&P 500 Information Technology Index is a capitalization-weighted index comprised of S&P 500 constituents in the information technology sector.  The S&P 500 Financials Index is a capitalization-weighted index comprised of S&P 500 constituents in the financials sector.

Download a PDF of this post, please click here.

Posted on Thursday, November 29, 2018 @ 1:55 PM • Post Link Share: 
Print this post Printer Friendly
  How Bonds Have Fared Since 7/8/16
Posted Under: Bond Market

 
View from the Observation Deck  
  1. The yield on the benchmark 10-year Treasury note (T-note) closed at an all-time low of 1.36% on 7/8/16, according to data from Bloomberg.
  2. For comparative purposes, its all-time closing high was set on 9/30/81 at 15.84%, while its average yield has been 6.18% from 1/5/62 to 11/26/18. 
  3. From 7/8/16-11/23/18, the yield on the 10-year T-note rose from 1.36% to 3.04%, or an increase of 168 basis points (bps). It closed as high as 3.24% (11/8/18) in the period. 
  4. Since the Federal Reserve ("Fed") began raising rates on 12/16/15, the federal funds target rate (upper bound) has increased from 0.25% to 2.25%, or an increase of 200 bps, according to Bloomberg. 
  5. The cumulative total returns in the chart indicate that corporate bonds have outperformed the other major categories since the yield on the 10-year-T-note began its upward climb from its all-time low on 7/8/16, followed by shorter-maturity bonds.
  6. The strength of the U.S. economy supports further rate hikes by the Fed, in our opinion. We are expecting another hike in December 2018, with the Fed currently signaling three more hikes in 2019.
This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The ICE BofAML U.S. High Yield Constrained Index tracks the performance of U.S. dollar denominated below investment grade corporate debt publicly issued in the U.S. domestic market. The S&P/LSTA U.S. Leveraged Loan Index is a market value-weighted index designed to measure the performance of the U.S. leveraged loan market. The ICE BofAML Emerging Markets Corporate Plus Index tracks the performance of U.S. dollar and euro denominated emerging markets non-sovereign debt publicly issued in the major domestic and eurobond markets. The ICE BofAML Fixed Rate Preferred Securities Index tracks the performance of investment grade fixed rate U.S. dollar denominated preferred securities issued in the U.S. domestic market. The ICE BofAML 1-3 Year U.S. Corporate Index is a subset of the ICE BofAML U.S. Corporate Index including all securities with a remaining term to maturity of less than 3 years. The ICE BofAML 1-3 Year U.S. Treasury Index tracks the performance of U.S. dollar denominated sovereign debt publicly issued by the U.S. government with a remaining term to maturity of less than 3 years. The ICE BofAML 22+ Year U.S. Municipal Securities Index tracks the performance of U.S. dollar denominated investment grade tax-exempt debt publicly issued by U.S. states and territories, and their political subdivisions with a remaining term to maturity greater than or equal to 22 years. The ICE BofAML U.S. Corporate Index tracks the performance of U.S. dollar denominated investment grade corporate debt publicly issued in the U.S. domestic market. The ICE BofAML 7-10 Year Global Government (ex U.S.) Index tracks the performance of publicly issued investment grade sovereign debt denominated in the issuer's own domestic currency with a remaining term to maturity between 7 to 10 years, excluding those denominated in U.S. dollars. The ICE BofAML 7-10 Year U.S. Treasury Index tracks the performance of U.S. dollar denominated sovereign debt publicly issued by the U.S. government with a remaining term to maturity between 7 to 10 years.  

Download a PDF of this post, please click here.
Posted on Tuesday, November 27, 2018 @ 3:14 PM • Post Link Share: 
Print this post Printer Friendly

These posts were prepared by First Trust Advisors L. P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
Search Posts
MARKET ANALYSIS
Market Commentary and Analysis
Weekly Video
Weekly Market Commentary
Weekly Market Watch
Monthly Talking Points
Quarterly Newsletter
Market Observations
Subscribe To Receive Email
 


 PREVIOUS POSTS
US Stock Markets Ended November 23, 2018
US Economy and Credit Markets Ended November 23, 2018
A Snapshot Of Dividend Yields
US Stock Markets Ended November 16, 2018
US Economy and Credit Markets Ended November 16, 2018
Passive vs. Active Fund Flows
How Stocks Have Fared Since 9/20/18
US Stock Markets Ended November 9, 2018
US Economy and Credit Markets Ended November 9, 2018
A Global Snapshot of Government Bond Yields
Archive
Skip Navigation Links.
Search by Topic
Skip Navigation Links.

 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether particular investments are appropriate for their clients. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks independently and is responsible for exercising independent judgment with respect to its retirement plan clients.
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
Home |  Important Legal Information |  Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2018 All rights reserved.