Performance of SPDRs since 2003

Above chart lists the performance of the sector SPDRs from 1/1/2003 to up until today. The table only shows the price performance, it does not include dividends or capital gains.

As you can see from the table below, the financial sector has been the worst performing sector since 2003. The 3 best sectors since 2003 were Energy, Utilities and Materials. When I was running the numbers for this post and was calculating the performance, I got a good chuckle out after seeing the final numbers. I can distinctly remember the investment environment of the late 2002 and early 2003. It was the time of deflation scare. When you have deflation, you precisely don’t invest in Energy, Utilities and Materials! Don’t you? You probably invest in Financials! Isn’t that the common wisdom? Isn’t that the general consensus? In the hindsight, it looks like that 2003 was indeed a great time to buy Energy, Utilities and Materials and avoid financials. It is amazing to see how consensus was absolutely wrong in 2003.

Now, lets talk about investment environment today. Is consumer dead since housing has collapsed? Are financials dead since credit bubble has popped? Are healthcare stocks dead because Democrats are looking to control both houses and white house? Are Energy and Materials a great place to be because of the global growth story?

We shall see in 2012.

Sector allocation of index funds

The following table lists the sector allocation of 3 Vanguard index funds as of 12/31/2007; Vanguard total stock market index fund, Vanguard growth index fund and Vanguard value index fund.

The Vanguard total stock market index follows MSCI US broad market index, the Vanguard growth index fund follows MSCI US prime market growth index, and the Vanguard value index fund mimics MSCI prime market value index.

Sector	Total stock market	Growth index fund	Value index fund
Consumer discretionary	9.60%	11.90%	6.40%
Consumer staples	8.90%	10.10%	9.90%
Energy	12.00%	8.80%	16.60%
Financials	17.60%	7.70%	28.10%
Health care	12.10%	12.50%	11.50%
Industrials	11.90%	13.20%	9.50%
Information technology	16.80%	30.50%	1.90%
Materials	3.90%	3.60%	3.40%
Telecommunication services	3.30%	0.80%	6.50%
Utilities	3.90%	0.90%	6.80%

Recessions and mass layoffs

Whenever a recession approaches, mass layoffs increase by a lot in the economy. I found following data on the bureau of labor department’s website regarding mass layoff events. The table below lists the number of mass layoff events since the year 1996 as reported by BLS. As you can see from the table that even in the economic growth years mass layoff events range around 15k to 16k a year. In a recession, one we had in 2001, the mass layoff events spiked to around 21k. The years after a recession also saw a higher number of layoff events. The year 2002 had about 20k mass layoffs and year 2003 had almost 19k mass layoffs in the economy.

With today’s job numbers showing, 17,000 job losses for the month of January 2008, we should keep any eye on the mass layoff numbers from the BLS. A spike in mass layoffs, if it occurs, may be a sign of a recession.

Year	Mass Layoff Events
1996	14,111
1997	14,960
1998	15,904
1999	14,909
2000	15,738
2001	21,467
2002	20,277
2003	18,963
2004	15,980
2005	16,466
2006	13,998
2007	15,493

Datasource: http://www.bls.gov/news.release/mmls.nr0.htm