Since the market peaked on September 19, stocks have become extremely volatile over the last five weeks. The S&P fell 9.8% from the peak to the trough on October 15. I have written several pieces about the sectors and how the sentiment could have helped you devise a plan ahead of the downswing.
Looking at the performance since the low on October 15, the S&P has gained back 8.2% from the low to the close on October 27. These numbers show how important the timing was for traders. To be clear, I consider traders to be those looking to hold positions anywhere from an hour to a few months. I consider those that invest anywhere from a few weeks to six months to be speculators and those that are looking to hold investments for six months or longer are investors in my book.
Given those parameters, traders could have had a heyday with the market if their timing was good. I set up a table using the ten select sector SPDR ETFs and broke the performance down into three timeframes—from September 19 through October 15, from October 15 through October 27, and from September 19 through October 27.
Looking at the first period of time, you get what you should expect for the most part. The safety sectors of Utilities, Consumer Staples and Healthcare are the three leading sectors. The three bottom sectors show a surprise with Telecom being the second worst performer. Seeing Energy as the worst isn’t surprising, but I would have expected Consumer Discretionary to among the bottom three.
Looking at the next time period where the market bounced back, we see that the top three sectors are Healthcare, Telecom and Industrials. Seeing Healthcare at the top was a little surprising, but seeing Telecom rebound isn’t surprising. I was a little surprised that Energy remained among the bottom three and seeing Consumer Staples at the very bottom isn’t surprising. We also see that of those sectors that were in negative territory during the first period, only Healthcare and Consumer Staples have made up the entire loss.
Looking at the entire time period, we see the top three performers are Utilities, Consumer Staples and Healthcare while the bottom three are Energy, Materials and Telecom. The top three don’t surprise me in the least as they have outperformed for the entire time period by not losing as much during the first cycle (the bearish one).
If you are a trader and your timing was good, you could have done very well over the past five weeks by moving out of the market and then back in. If you are a speculator, the dip might have benefitted you if you were set up with some bearish bets or you may have made an effort to buy the dip. If you are a long-term investor, you might not have done anything.
Timing is just as important as the underlying investment, but you also have to know your time horizon. You need to know if you are a trader, a speculator or an investor.
