MarketWatch’s Mark Hulbert says that, if history is a guide, we’re not yet near the top of the stock market’s run.
Citing a study from Ned Davis research, Hulbert says that historically sector performance has been a good indicator of market peaks. “The key is the average performance of the S&P 500’s sectors in the three months prior to past bull market tops,” he writes. “Since the early 1970s, Ned Davis’ researchers found, the two sectors that most often outperformed the market prior to tops were consumer discretionary and consumer staples, while the laggards tended to be financials and utilities.”
Last year, this was the case before the bullish market turned downward. But this year, Hulbert says, it’s a different story, with financials outperforming the market and consumer staples lagging.
“The data don’t speak with one voice, to be sure. They never do,” Hulbert says. “But I think it is safe to say that the sectors’ recent returns do not fit the mold of performance prior to past market tops. This doesn’t mean the market isn’t close to a top, of course. It just means that, if the market is, it would be following a different script than the one that the market has tended to follow over the last four decades when forming such tops.”