Thursday, January 22, 2009

Sectors that will lead the recovery: UPDATED

First of all, I have no idea when the recovery will take place, but if the recovery were to occur with a bounce off the current low, the sectors that would lead are likely to be healthcare and staples.

According to Justin Mamis' Nature of Risk, the sectors that lead the recovery out of a bear market are those that a) underperformed relative to the market during the last bull cycle, and 2) outperformed relative to the market with the current bear cycle.  

Those sectors are healthcare and consumer staples which underperformed during the bull market from 2003 to 2008, with energy obviously far outpacing all other sectors.  




The second part of the Mamis thesis is that those sectors that have been relatively spared from the bear market will be the first to recover.  Again, those sectors that outperformed in the bear market are healthcare and staples as shown in the last two graphics below, with financials obviously leading the way downward.



6 comments:

Eric said...

Do a rebase chart, and show sectors from 2003-2006 lets see the 10 sectors and underperformance..

Sorry... btw I get iritated when people say "YOU SHOULD!!! and it's something that the other person wants to see."

Eric said...

quotes were messed up there.

Eric said...

also... maybe.... Maybe.....

we get what will be a large 2 swing bear flag off the nov low...

IF IF IF IF IF... we break upside

Tony said...

I'm not computer literate enough to do rebase charts, but on Yahoo I did enter in all the sector etf's and set the graph to 2003 to May 2007, and the sectors that underperform are XLV (health) and XLP (staples).

Mamis would call this a prolonged 5-year base formation in those sectors and they are set to fly with the recovery.

Eric said...

won't one of the stock sites let you do it....

sorry...

I'd just love to see the chart and am beat...

I would just love to see the underperformed from 2003-2007.

Tony said...

Here's the update:

http://kalamazoopost.blogspot.com/2009/01/sectors-that-will-lead-recovery.html