Consumer Discretionary Is Top Sector Performer Year To Date
James Picerno | Jul 31, 2018 09:28AM ET
The sharp tumble in technology stocks in recent days has yielded this year’s leading sector performance to consumer discretionary, based on a set of exchange-traded funds. Shares of consumer discretionary firms have also fallen in recent days, but the setback has been relatively mild compared with tech.
Consumer Discretionary Select Sector SPDR (NYSE:XLY) is up 12.9% year to date through July 30, edging out the 11.3% performance so far in 2018 for Technology Select Sector SPDR (NYSE:XLK).
Disappointing earnings and high valuations are weighing on several of the leading names in the tech sector. The so-called FANG shares – Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX) and Alphabet (NASDAQ:GOOGL) (aka Google) – slumped on Monday, extending last week’s weakness. The selling “presents us with the catalyst to shift toward value and valuations mattering,” Jefferies equity strategist Steven DeSanctis advised in a research note on Monday.
Tech’s stumble has left consumer discretionary with a small performance edge year to date. Note, however, that both sectors are still outperforming the broad market this year by wide margins. Indeed, SPDR S&P 500 (NYSE:SPY)) is up 5.8% in 2018 through Monday’s close – well below the year-to-date performances for XLY and XLK.
The worst sector performance so far this year: telecommunications firms. Vanguard Telecommunication Services (NYSE:VOX) is currently in the red by 5.9% for 2018.
Until recently, the tech sector was the clear performance leader. But as the chart below shows, XLK’s surge earlier this year has been followed by a dramatic tumble (green line), leaving XLY as the year’s top performer (black line).
Ranking the sector ETFs by current price relative to 200-day moving average shows that energy — Energy Select Sector SPDR ETF (NYSE:XLE) — is posting the strongest momentum profile at the moment, followed by the consumer discretionary (XLY) and tech (XLK).
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Note, too, that consumer discretionary (XLY) is posting the smallest drawdown. The ETF’s current peak-to-trough decline is a mild 2%. By contrast, telecom (VOX) has the biggest drawdown as of Monday’s close – a relatively steep 16% slide off its previous peak.
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