Best Performing Sectors This Week

| December 20, 2013 | 0 Comments

hot etfsAfter months of hints and mixed messages, the Fed began to taper this week.

The message from Fed Chairman was widely believed to signal the end of the year long stock market rally.  But a funny thing happened after the announcement… stocks rallied!

In fact, the S&P 500 closed at a new all time high of 1,810 on the day the taper was announced.  A look at the performance of the nine Sector SPDR ETFs relative to the S&P 500 over the last week reveals an extremely bullish trend.

Sector SPDR ETFs 

As you can see, the cyclical industrials and materials sectors led the S&P 500 higher while defensive sectors, like consumer staples and utilities, lagged behind.

Why are investors buying economically sensitive stocks?

The Fed’s announcement of a $10 billion cut in monthly bond purchases was delivered with a change in their forward guidance.  More specifically, the Fed ditched their 6.5% unemployment target for when they could begin to raise interest rates.

Now the unemployment rate would need to fall well past 6.5% and inflation needs to increase back towards their 2% target before they begin to raise interest rates.

In short, that pushes the target date for the Fed to begin raising interest rates out from 2014 to at least 2015.    

Needless to say, keeping short term interest rates near 0% for another year should help boost economic growth.  That should benefit sectors like industrials and materials that are more sensitive to economic conditions.

Here’s the upshot…

At this point in the business cycle, the name of the game is growth.  Businesses that can grow their top line, as well as the bottom line, stand to be the biggest winners going forward.

That bodes well for more upside in Materials Select Sector SPDR (XLB) and Industrial Select Sector SPDR (XLI). 

Good Investing,

Corey Williams

Tags: , , , ,

Category: ETFs, Sector ETFs

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets three times a week. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

Leave a Reply

Your email address will not be published. Required fields are marked *