North American developed market large-mid stocks (United States and Canada) bottomed simultaneously with other developed markets on 10/12/22, recovering over 10% since then. Also since October, the Bloomberg North American Large-Mid Index has experienced a “golden cross” wherein the 50-day moving average rises above the 200-day moving average. This represents an uptrend which can also been seen in the market’s “higher highs and higher lows” pattern since October. This is also the 28th day the index has been above the 200-day moving average, which typically does not happen in a bear market. Going back to the early 1990s, this 28-day duration of the current price holding above the 200-day performance after being below for more than six months was at the end of secular bear markets in 2003 and 2009.
Here I look at North America performance by sector since the October low to examine the breadth of the recovery. I start by looking at equal-weighted sectors, taking the top 85% of market cap, filtered for the 10% least liquid securities. Performance has been mixed with the traditional value sectors of materials and energy leading and lagging the other sectors, respectively. While oil prices have been muted lately, commodities like gold, which some investors see as an inflation hedge, did quite well in Q4, helping lift the materials sector when looking at both growth and value stocks.
North American Large-Mid Performance by Sector since 10/12/22*
*As of 2/24/23
Next, I separate North American stocks into growth and value universes, using our intangible-adjusted price/book value metric. The growth basket underperformed just slightly, returning 10.24% on average vs. 10.40% in the value basket. As an indication of the tepidness of growth’s outperformance we can see that traditional “safe haven” sectors of health care and utilities made up the best performing growth names. Energy, which outperformed last year, had its growth names underperform every sector, except for communication services which performed the worst among growth stocks in each sector.
North American Large-Mid Growth Performance by Sector Since 10/12/22*
*As of 2/24/23
Filtering our universe for value stocks, we can see that value slightly outperformed growth since the October low. Materials and consumer discretionary value stocks outperformed their growth counterparts. Industrials and health care value stocks also contributed double digit returns to the broader North America universe. Perhaps investors preferred value stocks, wanting some margin of safety against another decline.
North American Large-Mid Value Performance by Sector Since 10/12/22*
*As of 2/24/23
Performance for North America since early October 2022 has been an interesting mix between growth and value sectors, with energy the clearest loser after a banner year in 2022. During this rally, health care and utilities, considered to be safer in economic downturns, have been among the highest performing sectors overall, along with materials and industrials, which could represent a desire to hedge inflation and capture upside potential based in part on new US industrial policy.
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