Do Strong Starts Mean Strong Finishes?

As we noted in Friday’s Bespoke Report, through the first week of the year ,the best performing sectors were not what would have been expected. While the S&P 500 rose 1.83% through the first five trading days of the year, the Energy sector rose 9.31%. That is the sector’s best five-day start to a year since at least 1990. Materials was the next best sector notching a 5.68% gain. That is the sector’s second-best start to a year since 1999 when it rose 7.18%. Financials, Consumer Discretionary, and Health Care were also some of the better-performing sectors last week. Of these, there have been even better starts in recent years, although for Financials this year’s start was the best in a decade. While these sectors all led last week, sectors that had been leaders in the past year like Tech and Communication Services underperformed the S&P 500. That begs the question of how these sectors hold up throughout the rest of the year.

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As shown in the table above, the best performers at the start of the year have typically traded higher through year’s end, though, they do not tend to remain the best performing sectors YTD come December as shown in the table below. Over the past three decades, there have only been five years in which the best performing sector in the first week of trading ended up being the best performing sector from the end of the first week through the end of the year: 1993, 1994, 1998, 1999, and 2003. Each of those years, that sector was also the same: Tech. In other words, outperformance at the start of a year does not necessarily predicate outperformance for the full year. 

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