The S&P 500 (SPY) was up 12.8% YTD through Friday’s close, but only two sectors have beaten it. Energy has led most of the year, up 40.4% YTD, followed by Technology at 30.2%. From there, it’s a sizable drop to the next strongest sector, which is Industrials at 9.6%. Eight of eleven sectors are higher on the year, but outside of Energy and Technology, none have even posted a double-digit gain. Also remember that Energy is the smallest sector in the index with just 21 constituents.
Those two leaders have also cleared hurdles that relatively few sectors have reached historically. In the 36 prior years since 1990, only eleven saw at least one sector up 30% or more through October 2. Raise that threshold to 40%, and the number of years falls to just six. This year has one of each.
Having just two sectors outperforming the index at this point in the year is even more unusual. As shown below, it’s the lowest count through October 2 in our data going back to 1990. The previous low was three sectors in 2018, 2020, and 2023. At the other end of the range, eight sectors outperformed through this point in 2001.
There’s no prior year with just two outperformers to use as a comparison for subsequent market returns. In the three years when only three sectors were ahead, the S&P 500 averaged a gain of 3.1% over the rest of the year, compared with 4.9% across all years. That’s a small sample, but those periods of limited sector outperformance didn’t prevent the index from posting further gains, even if they were weaker than average.
Energy stands out for the size of its lead as well. Its 40.4% gain puts it 27.6 percentage points ahead of the S&P 500. Since 1990, there have been just eight prior instances across seven years when a sector outperformed the index by at least 25 percentage points through October 2. The most recent was Communication Services in 2023, when it led by 29.8 percentage points.
The table below shows how those sectors performed over the rest of the year. Seven of the eight added to their gains, and five continued to outperform the S&P 500. Energy’s own history has been mixed. In 2005, it fell 7.7% over the rest of the year as the index gained 1.6%. In 2021, Energy rose another 3.4% but trailed the S&P 500’s 9.4% gain. In 2022, however, it gained another 21.7% and beat the index by an additional 14.6 percentage points. A large lead at this point in the year hasn’t necessarily meant the run was over, but it hasn’t guaranteed further outperformance either.
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