The SPX Index (SPX) continues to reach new all-time highs, currently boasting a year-over-year gain exceeding 30%. This impressive performance indicates strong market momentum, but it may also raise concerns among investors about overbought conditions. In this week’s analysis, I will delve into historical instances when the SPX surged by 30% over a 52-week period and examine which sectors performed the best and worst over the past year.
Implications of 30% Gains
Reviewing data back to 1950, I identified periods when the SPX gained 30% or more over the previous 52 weeks, marking the first such reading in at least 100 trading days. For investors wary of a potential market slowdown, the findings are reassuring. Following these significant year-over-year gains, the SPX typically performs at or slightly below average in the short term (up to three months). However, the six-month returns after such 30% gains slightly outpace typical market performance. On average, one year after these substantial increases, the SPX has gained approximately 11.5%, with 23 out of 26 instances yielding positive returns. This suggests that strength may continue to foster further growth in the long term.
Best and Worst Performing Sectors
In this analysis, I categorized around 2,200 optionable stocks into 39 distinct sectors and ranked them based on various criteria.
Top 10 Best and Worst Sectors
The best-performing sector over the past year is Telecom Equipment, with its average return bolstered by three stocks that more than doubled in value, including AST SpaceMobile (ASTS), which has skyrocketed nearly 600% year-over-year. Conversely, the Automobiles and Parts sector has shown an average negative return, with even a 30% market gain unable to lift these stocks. Rivian (RIVN) stands out as a significant underperformer, having lost half its value over the past year.
Performance by Positive Stock Percentage
When ranking sectors based on the percentage of stocks showing positive returns, Bank stocks excelled, with 183 out of 184 stocks posting gains; the only exception being New York Community Bancorp (NYCB). Again, the Automobile sector lagged, with just four out of 28 stocks recording positive performance over the past 52 weeks.
Proximity to 52-Week Highs
Another perspective on sector performance reveals the top 10 sectors ranked by the percentage of stocks within 5% of their 52-week highs. Boring sectors such as utilities, real estate investment trusts (REITs), investment banks, insurance, and precious metals dominate this list. Unsurprisingly, the automobile sector had the fewest stocks near their 52-week highs.
This comprehensive analysis underscores the diverse performances across sectors in light of the SPX’s impressive gains.