Over long time periods, sector performance is largely driven by the overall state of the economy, underlying corporate earnings, current and predicted interest rates, geopolitical events and inflation, among other factors.
Reviewing the sector performance for the month of March (a very short time-period), two things become very clear:
- First, sectors do not move in lock-step with one another and will often provide very divergent returns for investors – depending on timing and the current economic climate and
• Second, March did see divergence in sector performance, with the spread between the best (+10%) and the worst (+1%) broadening relative to previous months. - Secondly, the observed divergence in sector performance during March, highlighted by a notable spread between the highest and lowest performing sectors, reflects the multifaceted nature of market reactions to both anticipated and unexpected events. This divergence not only emphasizes the unpredictability inherent in short-term market movements but also showcases the potential for significant variability in returns within a relatively brief timeframe.
Sector Highlights Through March 2024
In February and March, markets saw broad sector participation as all 11 of the S&P 500 sectors advanced. Contrast that with January, where 7 of the 11 S&P 500 sectors advanced.
In addition, for March, the range in sector returns broadened considerably relative to previous months, with Energy up over 10% and Health Care up less than 1%. That is still a fairly significant range in just a single month.
Here are the sector returns for the month of March and February (two very short time-periods):
What Does It Mean for Investors?
At a very basic level, the differences in returns for the 11 S&P 500 sectors support two fundamental principles of financial planning – asset allocation and diversification.
At your next portfolio review, let’s revisit the differences between asset allocation and diversification. And we can discuss how to ensure that your portfolio is consistent with your risk profile and personal goals.
If you are a Legacy client and have questions, please do not hesitate to contact your Legacy advisor. If you are not a Legacy client and are interested in learning more about our approach to personalized wealth management, please contact us at 920.967.5020 or connect@lptrust.com.
This newsletter is provided for informational purposes only.
It is not intended as legal, accounting, or financial planning advice.
