S&P500, the past few years

The below is an interesting graph, showing sector returns over the calendar years.

Two things to note; one, that Information Technology has been dominant, in 4 of the past 7 years, and two, that the number of “winners vs losers” is usually more even, but since 2019 the outperforming sectors have been relatively concentrated in just a handful of sectors.

In 2023, 8 sectors were but a fraction of the S&P500’s 26.3% return, and 4 of them were flat to negative. That makes active management pretty challenged; gains are not coming from a diversified set of eligible opportunities, instead they are sector or factor bets, and highly concentrated within those.

There isn’t anything overly wrong with sector or factor bets, but it is helpful to understand what the drivers were, and if you agree that they will “keep repeating” over the years to come.

I would say the Magnificent 7 are very expected to retain their dominance, overall, and that’s not a bet we are especially keen to make.

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Please note that past performance is not a reliable indicator of future performance.

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