Last Quarter's Best And Worst Sectors

Last Quarter's Best And Worst Sectors

over 3 years ago2 mins

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Now that the third quarter of a completely wacky year has come to an end, investors might want to take a look at which sectors performed best and why 👀

What does this mean?

The global economic recovery – knock on wood – kicked off in earnest last quarter, but US stocks were way ahead: they’d already risen 20% in the second quarter. Investors weren’t necessarily expecting a repeat of that, mind you, and it’s just as well: US stocks were “only” up 8% overall last quarter.

Source: Google Finance
Source: Google Finance

That was mostly thanks to a 14% rise in consumer discretionary stocks (led by the likes of Nike and Amazon), as well as a boost in seemingly foolproof tech and communications stocks 💻 Industrials and materials firms also lent a hand as investors increasingly opted for “cyclical” companies – whose earnings growth is tied to the economy’s – and those that have benefited from an uptick in house-buying.

Why should I care?

Energy companies – down almost 20% on average – were last quarter’s worst performers. No big surprises: their earnings have continued to suffer from the pandemic’s effects, including plummeting oil and gas demand from once-major customers like airlines ✈️ But that slump might be about to turn: some analysts are anticipating a “rotation” away from the high-growth stocks that have been driving the market higher so far, and toward cheap-looking “value” stocks like oil.

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November’s US election is likely to have a bigger effect on stock markets than any single industry, but its impact on company earnings might actually be more positive than people think 🇺🇸 Investment bank Goldman Sachs has worked out that the outcome investors reckon is most likely – a big Democratic Party win – would boost profits 4%. There’ll be tax hikes, sure, but they’ll be more than offset by economy-boosting government spending.

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