Gains have been so broad this year that nearly all investors have something to celebrate
By Ryan Vlastelica
Only three of the 28 investment categories Goldman tracks are down this year
It's like fish in a barrel. That is the sense investors may be maintaining in the face of Wall Street's recent uptrend this year.
Gains have been extremely broad in 2017, with most every major region, sector, and asset class positive. The uptrend has been so upbeat that of the 28 security categories tracked by Goldman Sachs, 24 of them have gained in the first nine months of the year.
Don't miss:What rose in the third quarter? Stocks, bonds--basically everything (http://www.marketwatch.com/story/what-rose-in-the-third-quarter-stocks-bondsbasically-everything-2017-09-29)
Also read: Why stocks may be 'on verge' of a melt-up
The year's leader, it should not come as a surprise, has been the information technology sector, which has seen massive gains thanks to the outperformance of such large-capitalization names as Apple Inc. (AAPL), Facebook Inc. (FB) and Google-parent Alphabet Inc. (GOOGL)(GOOGL). The three stocks represent most of the members of FAANG, a quintet of stocks (along with Amazon.com Inc. (AMZN) and Netflix Inc. (NFLX)single-handedly responsible for a hefty chunk of the overall market's rise (http://www.marketwatch.com/story/a-quarter-of-sp-500s-2017-climb-due-to-five-stocks-yes-those-five-2017-07-27).
The S&P 500 information technology sector is up 26% thus far in 2017.
The strength in tech names also contributed to the strong year-to-date performance of the Nasdaq-100 , up 23.2% in 2017. The index of the largest companies traded on the exchange is heavily weighted toward tech stocks, along with biotechnology companies and consumer-discretionary names like Amazon and Netflix. (The broader Nasdaq Composite Index is up 21.4%. The Dow is up 14.7%.)
The S&P 500 has gained 13.3% so far this year, behind both the health-care and the materials sectors, as well as the Russell 1000 growth index, which take a broader view of the U.S. equity market, and tilts the benchmark toward the fastest-growing names.
Of the 10 best-performing categories tracked by Goldman, only one is outside the U.S. The MSCI emerging-market index was the second-best performer of the year thus far; an exchange-traded fund that tracks the index (EEM) is up 30.2% this year. (An different EM index, run by FTSE, is up 23.7% in 2017; the milder rise is due to their different compositions (http://www.marketwatch.com/story/the-biggest-emerging-market-etf-doesnt-hold-some-of-the-biggest-em-stocks-2017-05-30).)
Among other major categories, bonds (AGG) are up 1.3% and gold is up 10.8%.
Among weaker-performing securities, a global macro hedge-fund index was essentially flat on the year, while three categories were more firmly lower. Two of those, however, are highly correlated: the energy sector and crude-oil prices. (One losing trade Goldman didn't list: the U.S. dollar, which is down 8.6% on the year and is on track for its weakest annual performance since 2003.)
U.S. listed oil was the worst-performing security that Goldman tracked, down 6.3%.
While two of the losing trades were equity sectors--energy stocks and telecom stocks--the effect of their decline was slight on the broader market. The energy sector comprises 6% of the equity value of the S&P 500, compared with the tech sector's 23%. Energy stocks account for 3% of the S&P's net income, while the tech group contributes 22%.
Telecom is even smaller, making up just 2% of the S&P 500's equity capitalization and 3% of the net income, according to Goldman's data. The industry is so small that it is made up of a mere four companies: AT&T (T), Verizon Communications (VZ)CenturyLink (CTL), and Level 3 Communications Inc. (LVLT).
In other words, the telecom sector has such a slight weight in the overall market that the weakness in the group probably hasn't been felt that much by broad-market investors. And among sector-based exchange-traded funds, telecom stocks are included as components of the tech ETF, which is the strongest gainer of the year even with their negative contribution.
Read more:This is the reason the tech ETF has underperformed the S&P 500 tech sector (http://www.marketwatch.com/story/this-is-the-reason-the-tech-etf-has-underperformed-the-sp-500-tech-sector-2017-10-03)
Despite telecom's weakness thus far this year, Goldman wrote that it "currently appear to be the most undervalued sector" in the market, based on a measure of its implied earnings growth.
-Ryan Vlastelica; 415-439-6400; AskNewswires@dowjones.com
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