Over the past three years the markets have been very correlated. Not all, but many of the sectors have moved up or down in lockstep fashion. The stocks in the S&P 500 have been the most popular making that index very difficult to beat.
Those correlations seem to have started to change, ever since August 1st, or about the time interest rates started moving up. Increasing interest rates have historically disrupted many of the standard market correlations. It will be interesting to see if the S&P 500 will be able to continue its dominance going forward.
Since August 1st:
- The S&P 500 is down 0.3%
- Small Cap stocks are up 1.2%
- Cyclical stocks are up 2.9%
- Consumer stocks are down 2.9%
- Utilities (supposedly conservative) are down 6.8%
- Real Estate (also conservative) is down 4.0%
- Telecom is down 4.9%
Bottom line, sector correlations are more dispersed than they have been. Conservative sectors are getting beat up.
At Paragon, we like to see less correlation between the sectors. Uncorrelated markets give our models much more to work with. It will be interesting to see if these trends continue. Keep posted.
Written by Dave Young, President and Founder of Paragon Wealth Management
Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy. All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results.