There’s no shortage of things to worry about in the months ahead, but you wouldn’t know by reviewing year-to-date returns for the leading equity sectors. Tech and communications services are still red-hot this year, leaving the rest of the field – the stock market overall – in the dust, based on a set of ETFs through yesterday’s close (Apr. 26).
Technology Select Sector SPDR® Fund (NYSE:XLK) remains the top dog by far with a sizzling 17.7% total return year to date, a world above the broad market’s 6.1% gain via SPDR® S&P 500 (NYSE:SPY).
Communication Services Select Sector SPDR® Fund (NYSE:XLC) is a strong second-place performer with a 17.3% gain in 2023.
Most of the sectors, by contrast, are underwater this year. The deepest loss, unsurprisingly, is in finance. Due to the spillover effect from rising interest rates and the recent turmoil in the banking sector, Financial Select Sector SPDR® Fund (NYSE:XLF) is down more than 5% this year. Although the collapse of several regional banks appears contained, blowback looks set to continue as First Republic Bank (NYSE:FRC) may be set to slip over the edge.
“It’s becoming clearer each day” that the First Republic is “toast,” notes Don Bilson at Gordon Haskett, a research firm, in a note to clients on Wednesday. CNN reported,
“The only question that really needs to be answered is whether the [Federal Deposit Insurance Corporation] moves in before the weekend or during the weekend, which is when it usually does its thing,”
If true, the news will deliver another shock to the banking industry.
Despite the strong gains in tech and communications services this year, upside momentum for the equity sectors overall remains mixed. Using a set of moving averages to track trend strength points to generally weaker performance ahead for stocks generally vs. recent history, echoing the view from a month ago.
