By Gunnar Schifley, Staff Writer
The 2018 United States equity market has not been great. Recent news of investors and others gaining more confidence in the market has been increasing, but the numbers from these last four months show the road to May has not been pleasant for everyone. Using the SPDR Sector ETFs, it becomes apparent the various sectors of the market have all been performing significantly worse than the pace that many expected.
Starting with the good news, consumer discretionary, technology and energy are the three sectors that have positive returns this calendar year, gaining 2.92 percent, 1.36 percent and 0.97 percent, respectively. Discretionary was driven by gains in Netflix and Amazon, both of which have performed spectacularly this year and carried the sectors higher.
The overall S&P 500 has seen a minus 1.46 percent change since this year, dragged down by politics, high volatility and corrections, following strengthening economies throughout the world. The sectors that performed the worst this year so far are consumer staples, real estate and materials.
Consumer staples saw a minus 11.92 percent change so far this year. Big losers dragging down the sector this year have been companies such as Altria, Philip Morris, Proctor & Gamble, Walmart and others. Continued consumer sentiment shifts have hurt Phillip Morris and Altria and there have been increasing concerns over regulatory actions involving the e-cigarette market, which was a prime growth area of focus for the companies.
Walmart saw value loss after they had troubles in their online division and investors lost faith in brick and mortar giants’ abilities to compete with companies like Amazon. Another observation here can also be made in regards to the drop in staples, as economies have strengthened around the globe and discretionary spending has risen. Staples can be expected to see a reverse effect.
Looking towards real estates and the minus 7.98 percent change this year, the housing market comes into discussion. The housing market has seen increasing prices in many areas accompanied by decreasing inventory. Recently, there has also been a shift towards existing homes versus new homes, which could lead to an increasing supply of new homes and a lack of building potential. Only four equities within the Sector SPDR performed positively this year, an indicator of an industry-wide dilemma.
Materials this year saw a minus 5.44 percent change so far. The biggest impact any singular equity had on this was DowDupont, which had a significant effect on the sector performance. The company was formed by a merger in 2017 and expected synergies and savings were much higher than the reality of the situation.
Then came the news that they will be splitting into three separate, distinct business units, which has not been sitting well with the market.
Overall, 2018 has not looked like a great year for any sector of the market, as investor confidence seems to grow in recent weeks. Hopefully the market can come back and have a strong third and fourth quarter in 2018.
