an tSionna {03.09.15-Market Sectors}

Here's a chart showing how the various market sectors that comprise the S&P 500 have faired so far in 2015. {You can double-click on the chart to make it larger.} Energy is self-explanatory.  Utilities and financials have more to do with interest rates.  Markets are beginning to anticipate US rate hikes in 2015.  Friday the market had a tantrum on the good employment numbers because of fears that interest rate hikes will now come sooner than recently expected.   

Utilities and by extension other income producing assets are taking the brunt of this right now.  A basket of 10 ETFs that we follow which have a large income component are down about 1.5% year to date, with the majority of those losses having come in the past three weeks.

Now I'm one of the folks that think that interest rates will rise somewhat in 2015 or early next year,  but I also think that's not going to much of a factor whether the market goes up or down.  Probability suggests that any rise in rates should be muted.  Rates cannot dramatically rise here when many places in the world carry negative interest rates.  Also, on balance, I think investors will ultimately realize that a slight rise in rates is a good thing as it will likely mean that the economy is doing better and the Federal Reserve feels it is strong enough to pull back on some of the support they've injected into the system these past several years.

Right now the market doesn't see it that way in regards to interest rates, but let's wait and see how it reacts in the next few weeks.  Personally I think if these higher yielding ETFs pull back more, then probability suggests they will be better buys.  

As for the market itself, there are things we are worrying about which will be the subject of an upcoming post but a slight rise in interest rates is not our chief concern.

Posting schedule this week:  Wednesday, Thursday as I have to be out.  May have a few quick thoughts on the other days.

Performance Chart comes to us from Stockcharts.com.

*We are long various sectors depicted above via ETFs or via ETFs related to the S&P 500 in client and or personal accounts.  Positions can vary in accounts depending on account strategy and the unique risk/reward characteristics of our clients.