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New Addition To Our Coverage Of US Stock Market Sectors

Posted on: Sunday, February 16th, 2014

We begin our analysis of sector-related asset flows with a pie chart (below), our own metric that determines what percentage of the sector pie each sector currently comprises.

Chart 1

Asbury Research Sector Asset Flow Pie Chart

We then compare that chart with one that shows the daily historic average composition of the “pie” (not shown) based on these data.  This comparison reveals which sectors are currently at over-invested or under-invested extremes versus their historic norms.  Moreover, these extremes define potential opportunities to underweight or overweight particular sectors, in anticipation of them eventually migrating back to their historic norms within the “pie”.

One important distinction to make pertaining to our metrics described here today is that they are based on a “zero sum game” within a defined pool of sector bet-related assets.  This means that, for example, if Technology comprises 20% of the sector pie this week, up from 18% last week, that additional 2% is coming out of one or more other sectors.

At the beginning of the year we introduced a new, proprietary indicator based on these asset flow data, a line chart that plots the day-to-day percentage of the sector pie that each particular sector comprises.  This indicator, as plotted by the black line in the lower panel of the chart below, confirmed our suspicions that, in the vast majority of cases, a growing “slice” of the sector pie will coincide with relative sector outperformance as investor assets leave other sectors to participate in that particular sector.

Chart 2

Sector Bets Comprised By Consumer Discretionary

Beginning this week, we are introducing another way to view these sector-related asset flow data, a table (below) that displays what percentage of the sector pie that each sector has comprised at various time intervals over the past three months.

Table 1

What Percentage Of The Sector Bet Universe Does Each Sector Comprise?

Note that the “Now” column is color-coded, to highlight the two sectors with the greatest inflows (green, based on the percentage change) and outflows (red) from a week earlier.

This past week, the two sectors with the biggest inflows were, in order, Materials (6.45% of the sector pie from 6.17% last week) and Health Care (11.91% from 11.67%).  The two sectors with the biggest outflows were Technology (17.86% from 18.02%) and Consumer Staples (6.87% from 7.08%).

Look for this new table in our weekly Keys To This Week report, our monthly Sector Watch report, and in additional reports as appropriate.  Questions, comments welcome.