Monday, February 1, 2010

The Kirk Report

The Kirk Report

January Barometer Portfolio

Posted: 01 Feb 2010 07:21 AM PST

January Barometer Portfolio
You've probably heard by now that there's a strong belief that the sectors that outperform in the month of January tend to outperform for the full-year ahead. I've heard the same for many years, so last year to test that theory we looked at the sectors (as represented by ETFs) which outperformed in January of 2009. At the time, three sectors outperformed the rest: Utilities (XLU), Healthcare (XLV), and Energy (XLE).

So for the full year of 2009, how did those groups perform for the entire year? Here's the data:

Full-Year 2009 Sector Performance

As you see the three sectors which outperformed the S&P 500 as represented by the SPY were Technology (XLK), Materials (XLB), and Consumer Discretionary (XLY). None of these outperformed in January of 2009. In fact, Utilities (XLU) which was the best sector performer in 2009 underperformed everything else. While one year's performance doesn't offer much to go on, it just goes to show that sometimes market beliefs are not validated by the performance.

With that said, this year we'll do the same thing by looking at the sectors which outperformed the most last month to see if we see the same thing again in 2010.

Sector Performance: January 2010

So far, Healthcare (XLV), Consumer Staples (XLP), Industrials (XLI), & Financials (XLF) are outperforming while Materials (XLB) and Technology (XLK) are underperforming.

For those of you more interested to see subindustry relative strength, I recommend the ETFdb 60 Index which offers you the ability to track on a year-to-date basis the largest unleveraged ETFs covering a variety of sectors. According to that, here are the ETFs which are positive on a year-to-date basis:

ETFdb 60: YTD

We will check back in a year from now to see if what we saw in 2009 continues again this year and that sector performance in January has no direct relationship to year-long performance trends.