Trading Ticket by Jayanthi Gopalakrishnan
SELECT SECTOR SPDRs
• Financial Select Sector SPDR (XLF)
• Consumer Discretionary SPDR (XLY)
We have seen our fair share of volatile markets over the past few years. Just when we thought the markets were gearing up for a nice rally, the economic problems in the eurozone sent them back to that same volatile behavior. Even though in times of economic crisis all sectors tend to follow the broader markets, there are some such as consumer staples, health care, and utilities that are considered safe havens. Then, just as the markets start to recover, sectors such as financials, consumer discretionary, and industrials tend to outperform.
In Giorgos E. Siligardos’ article this issue, “Applying The Sector Rotation Model,” the author states that the outperformance of energy, consumer staples, health care, and utilities warn of possible trouble in the broader markets, whereas the outperformance of financials and consumer discretionary sectors indicate a stock market flush.