Market Commentary - May 2022

Market Commentary - May 2022

| June 10, 2022

Mixed S&P 500 Sector Performance for May 2022

Only 6 of the 11 sectors were positive and the range was unusually wide

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 April (a very short time-period), two things become very clear:

  • First, sectors do not move in lockstep with one another and will often provide very divergent returns for investors – depending on timing and the current economic climate and
  • Second, May continued to see very real divergence in sector performance, with the spread between the best (+14%) and the worst (-5%) being unusually wide.

Sector Highlights Through May 2022

For the month of May – as was the case in April – sector performance was mixed, as 6 of the 11 S&P 500 sectors were green (versus 4 of the 11 in April).

And while five months is not very helpful when trying to draw conclusions, it is interesting to see the difference a few months can make, as investors were reeling in January when 10 of the 11 sectors were red (with only Energy gaining that month), March saw 10 of the 11 positive and April and May saw a mixed bag.

In addition, for May the range in sector-returns was unusually wide, with the Energy sector gaining over 14% for the second month in a row and the Consumer Discretionary sector losing almost 5%, on top of its more than 9% loss in the month of April.

Here are the sector returns for the month of May and April (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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