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Rotation, Sectors and Stock picking


We seem to be seeing a little bit of rotation in the allocation to US indices. This is a rather strange thing to see in 2023: after all, the US30 is up 2.94% YTD, compared to 15.47% for the US500 and 36.57% in the case of the Nasdaq.

But if we look at the performance since 16/06 – the last relative high of the US indices (with very high volumes on those red inside candles on the cash market) – things are different. Yes, the NDQ is underperforming: the variety of the SP500 and the ”value” stocks in the DJ are currently allowing it not to do so badly.

US500, USA100, US30 relative performance, 16/06 – today, 30 mins

It is quite normal to see rotation from one sector to another when the market is already in a mature growth phase: the money in the hands of portfolio managers is not infinite and tends to be used often in its near-fullness, so as not to lose return possibilities. At a certain point, one takes profit on what has done best and repositions oneself – maybe only tactically – in sectors that seem a little cheaper. So in the last week and month we are seeing the return of sectors such as industrial, energy, financials and basic materials. Even real estate, despite its poor outlook and how expensive it is, with PE and FWD PE second only to technology.

US Sectors, Weekly and Monthly performance

In short, this may mean that for the most applied and meticulous traders, there are currently possibilities in stock picking: scanning the market beyond the index that groups everything together and finding individual names that have fallen behind in the rally of recent months. To do this we can rely not only on price but also on certain fundamental ratios, such as good future prospects (e.g. another EPS expected in the next 5 years) or a low price relative to earnings (PE) or current sales (PS): in the first case communication services would stand out; if we focus on the other two, we would perhaps want to focus our attention on Energy, Financials or even Industrial.

US Sectors, some fundamental ratios

In any case, there are many names, even big and well known ones, that have fallen behind and could offer an interesting future relative return: below are the companies in negative YTD of the DJ.

DJ30, stocks negative YTD

Click here to access our Economic Calendar

Marco Turatti

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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