Market Commentary - July 2021

| August 02, 2021

Mostly Positive Sector Performance in July

Nine of the 11 S&P 500 sectors were positive in July, but the range was big

Over every single time period, sector performance will be driven largely by factors one would expect, such as the overall state of the economy, underlying corporate earnings, current and predicted interest rates, and inflation, among other factors.

Reviewing the sector performance for the month of July (a very short time-period), two things become very clear:

First, sectors do not move in lock-step with one another and will often provide very divergent returns for investors – depending on timing and the current economic climate and
Second, July continued to see significant divergence in sector performance, with 9 of the 11 posting positive numbers for the month.

Sector Highlights Through July 2021

The overall trend for sector performance for the month of July was good, but the performance leaders and laggards continued to rotate yet again, just as they did for each of the preceding six months, rotating a couple of times over a very short time period.

For the month of July, sector performance was mostly positive, as 9 of the 11 sectors ended the month green, with the volatile Energy sector turning very red and the Financials sectors barely registering a negative monthly return.

But as has been the case for some time, the range in sector-returns was wide, with Health Care up almost 5% and Energy down more than 7%. And looking under the hood of sector returns, we can see another mini-sector rotation emerging, as Information Technology continued its (almost) front of the pack performance and Energy slid to the back of the pack.

Here are the sector returns for the month of July as well as June (two very short time-periods):

What Does It Mean for Investors?

At a very basic level, the differences in returns for the 11 S&P 500 sectors support two fundamental principles of financial planning – asset allocation and diversification.

At your next portfolio review, let’s revisit the differences between asset allocation and diversification. And we can discuss how to ensure that your portfolio is consistent with your risk profile and personal goals.