Standard & Poor’s just released its most recent “Outlook Report,” and, as usual, it is full of fascinating market data. One of the more interesting data sets is a table comparing the peak-to-trough declines of the major S&P 500 sectors, – energy, IT, financials, etc., – during the 2000-2002 and 2007-2009 bear markets:
| Sector | Oct. 9, 2007 to March 9, 2009 |
March 24th, 2000 to Oct. 9, 2002 |
| Energy | (46.76%) | (18.49%) |
| Materials | (59.55%) | (24.82%) |
| Industrials | (65.15%) | (38.13%) |
| Cons. Discretionary | (58.01%) | (41.17%) |
| Cons. Staples | (31.23%) | +24.23% |
| Healthcare | (39.88%) | (6.92%) |
| Financials | (82.62%) | (25.14%) |
| Info. Technology | (52.95%) | (82.37%) |
| Telecom | (50.72%) | (74.07%) |
| Utilities | (45.87%) | (47.72%) |
| S&P 500 Overall | (56.78%) | (49.15%) |
*table reproduced with data from above-referenced S&P report
What’s fascinating is that while the overall market decline in both bear markets was similar, an investor in the 2000-2002 downturn could at least have hidden out in consumer staples, which actually gained 24% during the period, or in healthcare, which suffered only a modest decline.
However, the 2007-2009 decline was much worse overall, with no sector spared, and even the traditional defensive sectors, – utilities, healthcare, consumer staples, – suffering an average decline among the three sectors of a bit less than 40%. I’m not sure if there’s a lesson to be learned here, but if there is, I guess it might be that sometimes diversification among sectors is beneficial, and other times it doesn’t help all that much.
