Divergence between price trends offers active investment strategies the opportunity to capture the trends with momentum and avoid downtrends.
It isn't as easy as it sounds, but the dispersion between sector trends performance can be a major source of alpha for systematic trend following, relative strength, and momentum.
Sector price trends offer dispersion: over the last 10 years, the average difference between the best-performing and worst-performing sectors has been 45% per year. In fact, the divergence between the best- and worst-performing S&P sectors is at a 20-year high.
The table is the percentage returns annually with each sector ranked.
Data Source: Bloomberg as of June 30, 2023. The NYSE® Equal Sector Weight Index™ consists of a strategy that holds all active Select Sector® SPDR® ETFs in an equal-weighted portfolio. The ETFs are rebalanced to an equal weighting quarterly during the months of March, June, September, and December. Past performance does not guarantee future results. Returns are based on the Net Asset Value of the Select Sector SPDRs. XLC 2018 performance is annualized from inception, 6/18/18.
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