Investments

June Stock Market is Showing Big Divergences

By Dean Barber

June 26, 2020

June Stock Market is Showing Big Divergences

Last month, Jason Newcomer, CFP®, and Financial Planner, and I discussed how we thought volatility was bound to creep back into the markets. As I write this article, the markets are now over 2000 points below where they peaked earlier in June. Today we’ll discuss that big divergence in June stock market performance.

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Major Index Performance in June Stock Market

Okay, let’s get started with what’s going on in all the major indices. I want you to notice as I go through some of these charts today that there is a big divergence in stock market performance. We have some sectors that are doing good, and then we have some sectors that are doing absolutely horrible. 

June Stock Market - Indices June 2020

Figure 1 | Source: Chaikin Analytics

Let’s start with Figure 1, looking at index performance so far during June 2020. The best performing index in the last month is the NASDAQ composite. You can see the NASDAQ is up by almost 6%, and the S&P 100 is slightly up at 1.6%. If you look further down at the S&P 500 and the Dow Jones Industrial Average, both are essentially where they were a month ago. That comes after the big surge we had the last couple of days in May into the first week in June. 

Index Performance Year to Date

June Stock Market---Indices-Year-to-Date

Figure 2 | Source: Chaikin Analytics

We’ve since fallen back down. Now we did see a big surge in the Dow Jones Industrial Average. Looking at Figure 2, on a year to date basis, the Dow is currently down about 10.69%. For the year, we only have one index in positive territory, and that’s the NASDAQ, which is up 14.63%. 

As Figure 2 scrolls down, you can see the very worst performing index is the S&P 600 SmallCap, which is -21.84%. So, we have a 35% spread between the best performing index and the worst-performing indexes. You don’t see that happen very often when you have a super healthy market, and when everything is doing well. We don’t often see these big divergences as we have in the June stock market.

Sector Performance in June Stock Market

Today, I also want to cover what’s going on in the different sectors, COVID-19, and the upcoming elections in November. 

Energy Sector

June Stock Market---Energy-ETFs-Year-to-Date

Figure 3 | Source: Chaikin Analytics

Figure 3 shows us the spread between the 26 ETFs that track the energy sector on a year to date basis. The best performing energy ETF is down by -30.64%, and the worst-performing is down by 60%. Again, there’s a big divergence just in the June stock market’s energy sector, but clearly, all negative.

Financial Sector

June Stock Market---Financial-ETFs-Year-to-Date

Figure 4 | Source: Chaikin Analytics

Like in Figure 3Figure 4 shows us the spread of the 27 ETFs that track the financial sector, and we see a very similar story in financials on a year to date basis. The best performing financial ETF is down -7.27%, but that one is kind of in lone territory. Once you get down to the third or fourth one and you can see -20%. 

The worst-performing ETF in the financial sector is down by -89.32%. Now, keep in mind, that’s an ETF that does three times what the financial sector does on the upside. So if the financial sector is losing, it’s going to lose three times as much. Those are very, very risky. You don’t want to have any money in those unless you’re confident the markets are going up. They are not for the faint of heart, trust me.

Healthcare Sector

Just Stock Market---Health-ETFs-Year-to-Date

Figure 5 | Source: Chaikin Analytics

Figure 5 is looking at the healthcare sector year to date. You might think that everything in the healthcare sector is doing fantastic. The best performing ETF in the healthcare sector is up 26%. As we go down here, though, you can see ETFs in the healthcare sector that are negative, with the worst down by -20%. Once again, there’s a big divergence in the stock market this June. 

Not all the stocks in the healthcare sector are doing well. The ETFs focusing in the right place are performing pretty well in the healthcare sector. 

Industrial Sector

Figure 6 | Source: Chaikin Analytics

Figure 6 looks at the industrial side of things. On a year to date basis, we can clearly see that in the industrial sector, the best ETF is down -3%, and the worst-performing is -27%. There is a huge divergence again. 

Technology Sector

Figure 7 | Source: Chaikin Analytics

Figure 7 is showing us the technology sector. When we look on a year to date basis, it’s anywhere from positive 26% to -72%. So there are some things that you need to be aware of and some things that you need to stay away from. 

Only Specific Sectors Holding June Stock Market Together

The point I want to make to you is this isn’t a broad-based market movement where everything is rising. It’s only specific sectors holding the markets together right now. And really what we should take away from that is that we still need to be exercising a good degree of caution. 

We are doing that every year, every single day. 

Uncertainties Ahead

COVID-19

We’re watching very closely as we see COVID-19 cases start to accelerate again. That’s a big unknown in the stock market. The stock market doesn’t like uncertainty, and we discussed that last month. However, there is still uncertainty. 

We haven’t heard much in the news lately about additional new treatments. There isn’t a lot of discussion about potential vaccines and trials. If we do get a treatment, I think it’s going to be off to the races because we’re going to see the economy fully opened back up, and people will go back to work. But we have no clue when that’s going to be out there. So that’s a big uncertainty between now and the end of the year. 

2020 Presidential Election

The other uncertainty is the election. It doesn’t matter if you’re Democrat or Republican, the markets today don’t like Joe Biden. However, they do like what Trump’s done with the economy. And from a social issue standpoint, they like Biden better than Trump. This election is going to be a very heated political environment. And I expect the stock market gyrations that are starting this summer to continue.  

At this point, I don’t see any reason to run to the sidelines or flee. We’ve got most of our indices are giving us the green light saying, “It’s still a good time even though the volatility.” 

Stay Connected

I encourage you to keep the lines of communication open with your financial planner. You need to understand what’s in your portfolio and understand how it fits into your overall financial plan. As always, our goal is to make sure that people can get to retirement and through retirement and do it with a high degree of confidence. If you have questions, let us know, give us a call at 913-393-1000 or fill out the form below. 

Make sure that you share this with your friends and have a Happy Fourth of July! I hope everybody stays safe, and I look forward to opening back up to where we can start seeing people in the office again. Take care.

Dean Barber
Founder & CEO

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