Friday, July 6, 2012

Feeling Left Behind By This Year's Stock Rally? You're Not Alone.

For the first 6 months of 2012, the S&P 500 rose +8.3%.  If you include dividends, the total return of the S&P has been 9.5%.

But this has been an odd rally.

In a world roiled with concerns about Europe and the global economy,  the best performing sectors in the market this year have been low quality, mostly non-dividend paying stocks.

Based on Merrill Lynch Quality indices, here's a breakdown of price-only performance so far this year:

  • C&D rated stocks:  +18.9%
  • B- rated stocks: +9.3%
  • S&P 500: +8.3%
  • A- rated stocks:  +7.5%
  • A+ rated stocks: +7.2%
  • A rated stocks: +5.9%
  • B+ rated stocks: +4.9%
  • B rated stocks: +4.5%
source:  Bank of America Merrill Lynch research

A couple of other factoids from the first half of this year:
  • Sector outperformance was concentrated in three sectors:  finance; technology; and telecom services.  Big losers were mostly concentrated in the energy and materials sectors;

  • While you might think that investors would be most interested in stocks that offered dividends, that has not been the case so far this year.  Non-dividend paying stocks have outperformed the S&P 500 by a whopping 8.98% so far in 2012, while the sectors that paid investors a dividend have lagged the broader market.