Market Commentary - October 2021

Market Commentary - October 2021

| November 05, 2021

Very Positive Sector Performance for October

October was almost the mirror-opposite of September as all 11 were green

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 October (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, October continued to see significant divergence in sector performance, with the spread between the best (+9.34%) and the worst (+1.99%) being quite wide.

Sector Highlights Through October 2021

For the month of October, sector performance was overwhelmingly positive, as all 11 sectors ended the month green. Interestingly, October was almost the mirror-opposite of September, which saw 10 of the 11 sectors record negative returns.

In addition, the range in sector-returns was exceptionally wide, with Consumer Discretionary jumping over 9% on the month and Communication Services gaining less than 2% on the month.

Unpacking the various sector returns further, we can sense another mini-sector rotation in our midst, as the Energy sector tops the charts again (as the price of a barrel of WTI Crude leapt from $68.59/barrel on September 1st to $83.57/barrel at the end of October).

Further, investors saw returns move dramatically in just 60 days, especially Materials, which lost almost 8% in September and gained over 5% in October.

Here are the sector returns for the month of October as well as September (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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