Market Commentary - August 2021

Market Commentary - August 2021

| September 08, 2021

Very Positive Sector Performance in August 2021

Of the 11 S&P 500 sectors, only the Energy sector was negative in August

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 August (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, August continued to see significant divergence in sector performance, with 10 of the 11 posting positive numbers for the month.

Sector Highlights Through August 2021

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

For the month of August, sector performance was overwhelmingly positive, as 10 of the 11 sectors ended the month green, with the volatile Energy sector being the only one in the red, as it lost more than 2% on the heels of July’s large negative return.

In addition, as has been the case for some time, the range in sector-returns was wide, with Financials up 5% and Energy down more than 2%. And unpacking the various sector returns further, we can almost detect another mini-sector rotation emerging, as financials jumped to the front of the pack after sitting towards the rear of the pack for the previous month.

Here are the sector returns for the month of August as well as July (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.

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