Saturday, August 11, 2007

Winners and losers

Which stock market sector has had the worst performance so far in August? If you answered financials, you (and I) were wrong. Taking the S&P Global 1200 as reference, it turns out that materials, energy, industrials and consumer discretionary all performed worse than financials.

This is not as strange as it may seem. Look at year-to-date results (YTD). Financials are the worst performing sector, as expected. This means that the damage inflicted by this crisis had been reflected in valuations before the lates news. Which is fairly good news. The bad news is that the sectors who fell most this month are cyclicals, which means that worries about global growth are rising.

Geographically, so far this month emerging markets have donde worse than developed markets and the US has done better than Europe. This has identical meaning to the sector breakdown above. The bad news is already in US stock prices (well, as long as more unanticipated bad comes along) and worries about growth are spreading to the stronger economies (Europe, emerging markets).