The Best and Worst Performing Sectors in 2017
Regardless of what you think of it, the second-longest U.S. bull market in modern history continues to rage on.
Even this year, which is the eighth anniversary of the lows of the Financial Crisis, has the S&P 500 charging forward with a 9.5% performance year-to-date. That said, it’s important to keep in mind that individual sectors that make up the market are not created equally – and while some have been crushing it, others have been taking a beating.
Today’s visualization, including a screenshot pulled from FinViz.com, shows a map of stocks in the U.S. market. Divided into different subsectors and colored by performance YTD, it helps give an idea of what has outperformed the market, and which stocks have been left in the dust.
The Winners So Far
1. Internet and Software
Companies like Facebook and Alphabet continue to dominate online advertising, while Microsoft, Baidu, and JD.com also are outperforming. SaaS-focused companies like Salesforce, Oracle, Workday, and Adobe also are beating the market as a whole in 2017 so far.
2. Resorts and Lodging
Hotels, cruise lines, and casinos are performing impressively in 2017 so far, even with companies like Airbnb competing on the accommodation front. Wynn Resorts, for example, is up over 40% on the year so far.
3. Aerospace and Defense
With Trump in the White House and both houses of Congress being controlled by Republicans, it’s no surprise to see big aerospace companies like Boeing up over 50% YTD.
As the population continues to age, medical appliance and biotech subsectors have taken off in 2017.
The Losers So Far
1. Real Estate (Retail)
The “Retailpocalypse” has not been kind to REITs focused on commercial spaces.
2. Auto Parts
With EVs and autonomous vehicles approaching on the horizon, less auto parts will be needed per capita.
3. Apparel Stores
Changing consumer tastes and the transition to online/mobile shopping is making life tough for some companies, like Urban Outfitters, which is down more than -30% on the year.
4. Independent Oil & Gas
The recovery in oil prices that happened in 2016 has not continued into 2017, and this has hurt independent oil and gas producers that have higher average costs.
Charted: The Key Investment Theme of Each Decade (1950-Today)
Here are the investment themes that have defined each decade from the ‘Nifty Fifty’ to the tech giants of the 2010s.
Visualizing the Key Investment Theme of Each Decade
Over modern history, a key investment theme has broadly characterized each decade.
In each case, a particular asset class, sector, or region captivated investors for an extended period, driving returns and outperforming the rest of the market.
This graphic shows 70 years of key investment themes, based on analysis from Ruchir Sharma of Morgan Stanley Investment Management via NS Capital.
Investment Themes by Decade
These decade-defining themes are often the product of a confluence of factors, including the macroeconomic environment, geopolitics, monetary policy, or other structural shifts like technological disruption.
Here are the central investment themes since the 1950s, each with at least 400% cumulative returns over each period:
|Decade||Investment Theme||Index / Asset|
|1950s||European Stocks||Europe GFD Composite|
|1960s||“Nifty Fifty”||U.S. Nifty 50|
|1970s||Emerging Markets/ Commodities||Gold and Oil Prices*|
|1980s||Japanese Stocks||TOPIX Index|
|1990s||American Tech||Nasdaq Index|
|2000s||Emerging Markets/ Commodities||BRICs and Oil Prices**|
|2010s||American “Mega Caps”||FAANG|
*Price change for gold and oil, represented as an average. **Equity market performance of Brazil, Russia, India, China and oil prices, represented as an average.
The 1950s saw a boom in European stocks during the post-war recovery. This was fueled by significant investment from corporations and governments as Europe became more integrated.
Then in the 1960s, investors poured into blue chip stocks in the “Nifty Fifty” including Johnson & Johnson, Disney, and Coca-Cola. The main premise was that these strong franchises would deliver high returns over the long run. During the 1973-1974 bear market, shares cratered.
As oil skyrocketed from $3.35 to $32.50 through the 1970s amid production and output cuts, commodities dominated, along with emerging economy exporters of oil and gold.
Later, through the 1980s, Japanese stocks dramatically increased. In 1989, the Tokyo Stock Exchange made up 41% of all global equities. It had eclipsed the value of the U.S. equity market just two years earlier.
In part owing to strong U.S. economic growth, American tech stocks flourished through the 1990s. While many high-flying tech stocks were wiped out during the crash in 2000, some still remain today. Qualcomm, which jumped 2,620% in 1999, is a multi-billion dollar semiconductor company. Amazon and Cisco were other survivors of this era.
Pivoting from growth assets, investors returned to commodities and emerging markets over the 2000s, this time with BRIC economies—Brazil, Russia, India, and China. The 2010s saw the rise of FAANG stocks as tech proliferated across countless industries.
The Next Decade Ahead
Given how each decade seems to be defined by a key investment theme, Sharma suggests that it won’t be another driven defined by American stocks.
The disconnect between the size of U.S. equity markets, at 43% of the global share, and its economic output, which is 26% of the world’s total, is one reason driving a new shift.
Another factor is stark differences in valuations. Today, the U.S. stock market compared to the rest of the world is at its highest relative level in 100 years, suggesting it is overvalued and primed for a shift.
Whether global stocks gain a greater global equity market share—to become a key investment cycle of this decade—remains an open question.
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