Judging from the recent market history, the current upward trend of the US stock market is likely to continue, benefiting not only the old blue chips in the industrial sector, but also the S & P 500 index and the Dow Jones industrial average.
The market is highly focused on the big tech stocks that now dominate the S & P 500, especially at Apple? NASDSAQ:AAPL ?This is especially true when the market capitalization has recently exceeded the $2 trillion mark, with technology companies weighing up to 20% of the index. But with the U.S. stock market hitting an all-time high last week, it’s not really the technology sector that’s delivering the highest returns to investors.
In fact, in the month before last week’s record high, the percentage gain in the industrial sector, which is more representative of the 20th century than the 21st century, was double-digit. In the month to August 14, industrial stocks in the S & P 500 led all sectors higher, by far more than 10%, twice the index’s overall gain.
In recent market history, this upward trend is likely to continue, benefiting not only the old blue chips in the industrial sector, but also the S & P 500 and Dow Jones industrial average.
Since 2010, industrials select sector SPDR ETF (trading code XLI, hereinafter referred to as “XLI fund”), an exchange traded fund that tracks industrial stocks, has seen 10% or more increase in a month. History shows that after the rise, the trend tends to continue: in the next two weeks, XLI funds rose by an average of 2.25%, and showed an upward trend for 90%; while in the month after the large rise of XLI funds, similar performance continued, with an average increase of 2.32%.
In terms of the S & P 500 index, which led the rise in the industrial sector, UPS? NYSE:UPS ?Up more than 40 percent, FedEx? NYSE:FDX ?It’s up more than 30%, Cummins? NYSE:CMI ?It is up more than 20%.
At the same time, the Dow Jones Industrial Average has been a consistent winner in these periods: for 90% of the two weeks after the rally, the Dow Jones industrial average rose 1.6% on average, compared with an average gain of 1.82% in a month.
Michael bapis, managing director of Vios advisors, a consultancy arm of Rockefeller capital management, said the “catalysts” driving the volatility of industrial stocks included the ongoing rotation of investors withdrawing from technology growth stocks and the industry sector being more attractive in terms of valuation.
“You’re going to start to see a rotation of investors moving from growth stocks to risk averse value stocks,” Mr. barbis said in a recent interview
Matt Maley, chief equity strategist at Miller Tabak, suggests investors should be cautious now, given the magnitude of the rally. “It’s almost a parabolic trend.” He said.
United Parcel’s earnings report in late July showed that the company’s profit performance in the last quarter was stronger than expected, as the outbreak of the new coronavirus triggered a door-to-door upsurge, and consumer shipments increased by 65.2%. “Our results are better than expected, in part because the epidemic has triggered changes in demand,” Carol Tom é, chief executive of UPS, said on the day of the results In novel coronavirus pneumonia, the company has even received additional delivery charges when delivery volume has soared.
The new coronavirus pandemic has brought the same benefits to FedEx, prompting Citigroup to take this as an excuse to say that it is bullish on the stock. However, Citigroup has also given another reason that it needs to deliver hundreds of millions of doses of vaccine in the future, which will also benefit FedEx’s stock.
But the global economic weakness has hit caterpillar? NYSE:CAT ?In late July, the company reported a 31% drop in quarterly revenue. Nevertheless, Caterpillar’s results were better than expected, and its share price rose sharply in the week after the results were released.
Last Friday, Caterpillar’s competitor, Deere? NYSE:DE ?It also announced better than expected results, driving its share price up.
Even Boeing, which has been hit hard, is now showing signs of recovery. Boeing hasn’t been among the top performers in the industry since last July, but it hasn’t been among the top performers in the industry since last July.
There are signs that uncertainty is still lingering. In this quarter, some large industrial companies, including Cummins, have been vague in providing financial guidance. Cummins told analysts: “while customer demand in some regions has improved as the quarter progresses, there are still significant uncertainties surrounding the speed of our market recovery.”
Technology stocks remained the best performing sector of the year, leading the S & P 500 index to pick up from its low hit in late March? NASDAQ:AAPL ?He Naifei? NASDAQ:NFLX ?The share prices of all the companies increased by more than 50%. While some market experts are concerned that Apple’s recently announced plan to split one share into five shares will weaken the performance of the price weighted Dow Jones industrial average, others believe that the momentum of technology stocks will give way to more classic market behavior as US stocks move further away from the lows at the end of March in the bull market.
“Given the uniqueness of this environment, the performance of technology stocks is expected, but that uniqueness is beginning to fade.” Jeff Kleintop, chief global investment strategist at Charles Schwab, said recently. “We seem to have emerged from the recession and are now expected to have passed the peak of new coronavirus infections in most developed countries, including the United States. This may mean that cyclical stocks will return to leadership on this road to recovery. “