In June, Some Sectors Have It, And Some Don't

There are no "sure things" in the financial markets. But there sure are "things." Two of those "things" are:

1. Except for the Nasdaq Index (for whatever reason), the month of June is often (though not always) unkind to the stock market.
2. Specific sectors have shown a definite tendency to outperform during the sixth month of the year, while others have shown a definite tendency to underperform.

So, let's take a closer look at sector investing in June using the 11 S&P 500 Sector Indexes starting in 1950.

We will test the top and bottom sectors as follows:

• Each June, we divide one portfolio by four and allocate 25% to each of the Top 4 sectors
• Each June, we divide another portfolio by four and allocate 25% to each of the Bottom 4 sectors

The top sectors include defensive sectors like Health Care, while the bottom ones are more aggressive sectors like Technology.

The chart below divides the growth of the Top 4 by the growth of the Bottom 4.  When the line is rising, it means the Top 4 sectors are outperforming and vice versa.

The Top 4 underperformed during the first seven years and last two years of the 1950-2020 test period. However, the Top 4 consistently outperformed the Bottom 4 for the intervening 61 years. So as we head into what can be a challenging month, it's worth noting that at least there are some sectors that aren't challenged quite as often.

What else we're looking at

• Full details on the top and bottom sectors for June.
• The ISM new orders to prices paid spread has plunged
• What a negative spread has meant for the S&P 500, sectors, and factors