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VisualMod t1_ixyp2r6 wrote

This is an interesting chart. It shows the secular rotation from healthcare and tech stocks to energy and financials. This is a result of the increasing popularity of value investing strategies, which seek to find undervalued companies with strong fundamentals. Energy and financials are two sectors that have been historically undervalued relative to other sectors like healthcare and tech. As investors rotate into these sectors, we expect them to outperform in the coming years.

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greatwhite5 t1_iy1lmu0 wrote

Good observation - this is also illustrating the business cycle. As the economy ebbs and flows, US sectors do better/worse. During periods of growth and expansion sectors like tech and consumer disc flourish while during times of downturn and recession, sectors like energy, materials and consumer staples see lower volatility (generally)

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silent_silverfox t1_ixyqfdr wrote

Everything reverts to the mean. Period.

Very good chart! thanks for sharing!

Quality, Value and Dividend ETFs will probably be printing in the next couple of years as markets normalize from the shock-injection of money and low IR.

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YoureAHunterGatherer t1_ixzu25q wrote

“Tech” and healthcare is pretty broad.

For example I still expect semiconductor ETFs like $SMH which have super robust moats to absolutely crush it the next couple years after being beaten down so low. There are only more IOT devices being made than ever before.

However things like airbnb, square, Meta etc may underperform and see much lower or maybe even negative growth

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mk46gunner t1_iy03oao wrote

Anytime I see BofA mentioned, I can't seem to escape my near-Pavlovian response to think BofA deez nuts and chuckle, before resuming whatever it was that I was doing.

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Nonbinary_Tea t1_ixz53uk wrote

Ta astrology would say that's a pretty big cup and handle ready to break bullish

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option-9 t1_iy2zlzf wrote

That's not TA, that's LTT's morning drink.

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Potato_Octopi t1_ixz6q0f wrote

Can't see energy and finance getting back to 36% of the index.

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tomwesley4644 t1_ixzalq0 wrote

Ah yes the classic Crab Chart formation.

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curious_geoff t1_ixzeg5v wrote

Energy sector has been rallying hard for well over a year. Debt free companies trading at 4x CF issuing special dividends… nearly all shale plays now in decline as demand peaks despite low economic activity in the heels of covid and remaining Chinese lock downs.

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JollibeeNo1Customr69 t1_ixzqcbq wrote

Looks like a great chart for a Pairs Trade (eg long the lower sector, short the higher sector).

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Infamous_Sympathy_91 OP t1_ixzzf18 wrote

Good call.

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JollibeeNo1Customr69 t1_iy050rs wrote

Thanks! Just looked these tickers up on TradingView to compare them on an overlay chart, and unfortunately it doesn't look as clean as your graph though lol. I might need to tweek some things still.

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eddie7000 t1_iy0lu70 wrote

As soon as the charts start to look pretty that's when you know the correlation is over.

Go for the ugly and you'll have a far better strike rate.

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JollibeeNo1Customr69 t1_iy0mxnc wrote

Solid info. Thanks! Do you know a reliable tool or scanner by any chance where I may be able to scan for dollar-neutral pair instruments? Something similar to this picture from Wikipedia?

https://en.wikipedia.org/wiki/Pairs_trade#/media/File:Pair_tool.JPG

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eddie7000 t1_iy0o2xy wrote

Reliable scanner? Lol.

As soon as a scanner looks like it's reliable it stops working.

You're better off figuring out which kind of losing trades you can handle without going batty. ie Lots of tiny losses and one massive winner, etc...

1

JollibeeNo1Customr69 t1_iy0t5kx wrote

Maybe if you're looking at little intraday scalp trades on a noisy, unreliable minute chart, but Daily, and more so Weekly, Monthly and even Quarterly chart set ups are quite reliable. Not all of us are looking for quick, "gut instinct", lucky, minute by minute scalps and are quit content to wait and watch the longer time frames and calculate the Discounted Cash Flows for a given company. As for Pair Trading, it is considered a lower risk "arbitrage" strategy by Hedge Funds and used by them precisely for that reason, usually on a Daily chart.

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VisualMod t1_ixyp27j wrote

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1

Goojus t1_ixz2atn wrote

Isn’t the financial industry still at an all time high though? I think clean energy can be a good thing cause investors might desperately flock to investing in it when the world’s at the brink of being on fire and governments pour money into it

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Alatornio t1_ixz8pap wrote

This looks like the pictures my psychologist shows me.

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Apprehensive-Ear-201 t1_ixzb7ym wrote

Things might work out well! So the next sitting president will have to deal with an abundant energy supply and a shit healthcare system on the verge of change… positive times coming!

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SonicOnMeth t1_ixzxnao wrote

Well the graph says share as a % of the market cap, so more tech simply means tech companies represent more of the index than financial. Seing as tech is used more now than 10 years ago and will probably be used even more in the next 10 years.

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Robincapitalists t1_iy0acq7 wrote

Think it would be worth separating energy to show exactly how small it is in market cap% of market.

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kuedhel t1_iy1kk9y wrote

GS went up 25% in the past month. I think you are late on the "Financials' train.

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Extension_Ad_1347 t1_ixypeq0 wrote

Interesting.. but it feels like financials Are going to have a rough time in the near future 🤔

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Infamous_Sympathy_91 OP t1_ixypsf2 wrote

With QT and rising IR, banks have more pricing power to profit from loans. A UK bank called Natwest, for example, is charging 5.49% on mortgages now, 2.49% above BOE 3%.

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Extension_Ad_1347 t1_ixypye6 wrote

But arent people going to default on their mortgage If the price goes too high?

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Infamous_Sympathy_91 OP t1_ixyrie3 wrote

Delicate balance the BOE is keeping to ensure house price stability for long enough so that if they default the bank can seek to repo their loans with enough equity in housing stock to get paid back fully. However, banks know many people will default as a last resort on their homes, so will dig into savings and cut back.

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