Take everything you thought you knew about the stock market this
year and throw it out the window.
After eight months of tech and healthcare dominance, the
record-breaking SP 500 has assumed a
fresh new face in September, being instead led higher by energy
and telecom shares.
Digging deeper, as the scorching-hot FANG
stocks — Facebook, Amazon, Netflix and Google — have headed
toward correction territory this month, energy producers have
stepped up and largely filled the void, aided by a surge in
crude oil prices.
This resilience shown by the SP 500, which just last week
hit a series of new record highs, goes a long way towards
disproving the notion that the stock market is trading at the
whim of the tech industry. That’s good news for bullish traders,
and a comeuppance of sorts for skeptics that warned against a
market reckoning in the event of tech weakness.
The rotation occurring underneath the surface of the SP 500
this month — out of tech and into other more attractively-priced
areas — has played out on a smaller scale a few times in the
past several months. On multiple occasions, exchange-traded fund
data has supported the idea that money pulled from
tech has simply been reallocated elsewhere in the stock
market, keeping indexes afloat.
“Sector rotation has been a defining characteristic of equity
markets throughout the spring and summer,” Fundstrat Global
Advisors technical strategist Robert Sluymer wrote in a recent
This dynamic has also been in play outside the confines of
sectors. Looking strictly on a return basis, the top 20% of
stocks in the SP 500 in 2017 through August have evolved
into the worst-performing quintile in September. On the flip
side, the bottom 20% from the first eight months of the year is
now the top quintile this month.
And records are being hit all the while — just the latest
impressive sign of resilience for the 8 1/2-year bull market that
refuses to die.