It may not be as large as the bond market or as ubiquitous as real estate, but the stock market is definitely the most talked about of the financial markets.
And while this has pretty much always been the case, the rise of index investing and robo-advisors in the last decade or so has certainly opened up the stock market to a new generation of investors.
For those just getting into the market or testing their chops in Quicken Loans fantasy stock league, we’ve put together a primer on just what is happening across each of the main sectors. There are 11 sectors according to the global industry classification standard, and here’s what each of them has done in the first half 2018.
We already covered the 2018 performance of the five largest sectors in this article, here’s a breakdown of the rest.
Energy
2018 has seen the resurgence of oil, with West Texas Intermediate-grade (WTI) oil priced above the $60 benchmark that most analysts consider a healthy range for the commodity. This sustained price strength, which briefly surpassed $70 in mid-May, means higher margins for companies like Exxon Mobil Corporation XOM, Chevron Corporation CVX, ConocoPhillips COP and drilling supply company Schlumberger Limited. SLB.
Other industries under the energy umbrella, such as natural gas concerns Newfield Exploration NFX and Continental Resources, Inc. CLR, have also found upside in the high global demand for energy. Heading into the second half of 2018, investors in this sector should be aware of the potential for falling demand as world’s central banks raise interest rates to stem possible inflation, which could have a negative impact on price.
The Energy Select Sector SPDR ETF XLE is up 3.67 percent year-to-date as of this writing.
Consumer Staples
On the other end of the consumer spending scale are manufacturers and suppliers of food, health, and other consumable goods. Typically these companies have stock charts that plot a slow and steady pattern and are considered long-term investments that store value. However, Multinational food and household goods companies like Kraft Heinz Co. KHC, The Coca-Cola Co KO and Johnson & Johnson JNJ have all struggled to gain the favor of investors in light of the strong showing from performance stocks in the tech or biotech industries.
While it might be easy to count this sector out for the remainder of 2018, there is very little fundamentally wrong with these companies. Each of them has posted a string of quarterly revenue results in line with analyst estimates. As always, they remain a good option if and when uncertainty or volatility appear in the market.
The Consumer Staples Select Sector SPDR ETF XLP is down 10.72 percent year-to-date as of this writing.
Materials
Perhaps the most volatile sector heading into the back half of the year, U.S. companies that mine, process or in some way manufacture basic materials like gold, steel and aluminum could see a lot of interesting activity as America’s mult-front trade war continues to d/evolve. The initial announcement of tariffs on Chinese-imported steel and aluminum was at first seen as a major boon to companies like Alcoa Corp. AA and United States Steel Company X, which would have presumably seen an uptick in domestic business.
However, now that Europe, Canada and Mexico are also involved and there is the potential that those countries will put tariffs on U.S.-made materials, the picture for many raw materials companies is less certain. However, such uncertainty could mean more interest in safety investments like gold, which benefits precious metal mining outfits like Newmont Mining Corp NEM.
The Materials Select Sector SPDR ETF XLB is down 1.57 ercent year-to-date as of this writing.
Telecommunication Services
With the rolling back of data collection and net-neutrality regulations earlier in the year and the planned merger of several major cable and phone service providers, telecom companies now have greater control over consumer data and access to online services then ever before.
However, all of the inside activity and legislation on the part of AT&T Inc. T, T-Mobile US Inc. TMUS and Comcast Corporation CMCSA to acquiree media concerns like Time Warner Inc. TWX and Twenty-First Century Fox Inc. FOXA have created a lot of uncertainty in the media space. As a result, he big name in this sector have traded sideways while these massive mergers have been worked out. That’s not to say there hasn’t been trader enthusiasm for telecom, but it has materialized around less monolithic players in the space like 2017 IPO Roku Inc. ROKU.
The Vanguard Telecommunication Services ETF VOX is down 5.5 percent year-to-date.
Utilities
Like consumer staples, utilities are generally considered value sponges for most investors. As a result, share price in these companies tend to remain within a certain range and aren’t expected to change dramatically over a short period. Because of the strength of the equity market and the surplus of energy commodities like natural gas and coal, the chart for utility providers Dominion Energy NextEra Energy Inc NEE and Duke Energy Corp DKE are showing a down trend.
However. there are bright spots among utility companies who have diversified into new forms of energy and have prioritized new technologies. NextEra Energy Inc. NEE and AES Corp AES are both positive year-to-date and both boast exposure to renewable technology. Another recent surprise in the sector is Sempra Energy SRE, whose stock saw a 16 percent spike in June after private investors with a stake in the company released a note suggesting the sale and restructuring of the company to unlock greater value in the future. Right now for utilities, the future is where growth lies.
The Utilities Select Sector SPDR ETF XLU is down 3.92 percent year-to-date as of this writing
Real Estate
The real estate market boomed over the course of 2017 and into 2018. Adjusted for inflation, home prices are the highest they have ever been and mortgage rates have just surpassed 4.5 percent. The housing market is on fire, and real estate in general is in demand.
However, for investors hoping to find their fortune with homebuilders and real estate companies, the high demand for land and the architecture has driven up costs, a price spike that is only exacerbated by the spectre of tariffs driving down supply and driving up the cost of lumber, steel, aluminum and everything else that typically makes a building.
Because of this, homebuilders like Lennar Corporation LEN and Toll Brothers Inc TOL, as well as some REIT companies that lease properties like Prologis Inc PLD have struggled to grow either their assets or their share price. That said, residential REITs do have the advantage of of tight real estate market to drive demand for affordable rental properties.
The Real Estate Select Sectors SPDR ETF XLRE is down 4.49 percent year-to-date.
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