I was chatting with Michael Panzner about the relative performance of numerous sectors since the market top in 2000. In addition to being a Technician, Mike is the author of the forthcoming Financial Armageddon.
We rejiggered a few starting dates, to see how when you bought specific sectors impacted your performance returns.
Consider these 3 different time frames:
2000 Market Peak to Present
click for larger chart
If you bought Telecom or IT in 2000, you are still buried, as those Sectors lost half their value. Over the same period, Energy, Materials, and Consumer Staples all did very well.
If you made your entries just before the War began in 2003, IT and especially Telecom did appreciably better.
However, they were outperformed by Energy and Materials. Additionally, Utilities, Industrials and Financials all did quite well, outperforming IT and Tel over the same period.
July 2006 (near market lows) to Present
click for larger chart
UPDATE: February 6, 2007 2:32 pm
Jack Ablin, chief investment officer at Harris Private Bank, says don’t get too excited about the recent pop in Tech (see above). It’s not about fundamentals — it’s about oil prices.
“Tech owes much of its advance to the 30% decline in crude prices. Over the last three years, technology has acted like a puppet on a string, responding to advances and declines in oil prices,” he writes in recent commentary.” The correlation between the oil prices and the relative performance of technology shares has been a remarkable negative 70%.”
Beginning July 21 when oil was near $75 a barrel, through Jan. 12, a few days before oil bottomed out around $50 a barrel, the S&P 500 Information Technology Index rose 28% – the exact mirror of crude prices. Mr. Ablin says as long as this relationship holds, “technology bulls must be, by definition, crude oil bears.”
Greasing the Tech Stocks
WSJ, February 6, 2007, 11:44 am
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