| The Utilities sector initially held up well as the market sold off, but once panic set in this sector sold off as well. Nevertheless, it did hold up better than the broader markets with a quarterly decline of 13.4%. Companies that produce, generate, transmit or distribute electricity or natural gas predominantly make up the Utilities sector. Component companies include NextEra Energy (NYSE: NEE), Duke Energy (NYSE: DUK), and Dominion (NYSE: D). Communication Services declined 17.3% during the quarter. This sector includes diversified telecommunication services, wireless telecommunication services, media, entertainment, and interactive media & services. Components include Facebook (NSDQ: FB), Alphabet (NSDQ: GOOGL), and AT&T (NYSE: T). The Real Estate Index, consisting primarily of real estate management and development companies and real estate investment trusts (REITs), just edged out the S&P 500 with a decline of 19.2% for the quarter. Simon Property (NYSE: SPG) and American Tower (NYSE: AMT) are among the largest representatives of this group.  The Consumer Discretionary sector, however, underperformed the S&P 500 with a quarterly decline of 21.4%. This sector includes industries such as automobiles and components, consumer durables, apparel, hotels, restaurants, leisure, media, and retailing. Several of these segments (e.g., restaurants, hotels, and leisure) have been hit especially hard during the pandemic, while others held up well (e.g., online retailers). This sector is comprised of companies such as Amazon (NSDQ: AMZN), Home Depot (NYSE: HD), and Walt Disney (NYSE: DIS). The latter was particularly hurt during the quarter due to park closures in response to the pandemic. The Materials sector declined by 26.2%. This sector includes companies that produce chemicals, construction materials, metals and mining, and paper and forest products. Among its largest components are DowDuPont (NYSE: DWDP) and Sherwin-Williams (NYSE: SHW). The Industrials sector declined by 27.0% as manufacturing ground to a halt in some areas. Component industries include aerospace and defense, building products, construction and engineering, electrical equipment, conglomerates, and machinery. Important constituents of this sector include Boeing (NYSE: BA), 3M (NYSE: MMM), and Honeywell (NYSE: HON). Financials were hit hard, declining by 31.8% during the quarter. In addition to banks, this group includes financial services firms, insurance companies, and consumer finance companies. Major companies include Berkshire Hathaway (NYSE: BRK.A, BRK.B), JPMorgan (NYSE: JPM), and Citigroup (NYSE: C). The Energy sector was in a class by itself with a decline of 50.5% for the quarter. Given the multiple uncertainties in the energy sector, this remains a very dangerous market for investors. Some of the energy sector's biggest holdings are ExxonMobil (NYSE: XOM), Chevron (NYSE: CVX), ConocoPhillips (NYSE: COP), EOG Resources (NYSE: EOG), and Schlumberger (NYSE: SLB). Exercise Caution The first quarter was tough, but investors are expecting things to get worse before they get better. The S&P 500 ended Q1 at 2,585, but Goldman Sachs (NYSE: GS) has estimated the bottom of this down-cycle at 2,000. If GS is correct (and I suspect they are right that there is still significant risk), that would imply ~20% more downside in this market. A recent survey by Boston Consulting Group found that 60% of investors are bearish for the rest of 2020, with 55% saying they expect the severe impact of the crisis to be over by the end of Q3. But 87% do not see a quick bounce back for the economy. It's only April but this is a year in the market that we will be glad to see in the rear view mirror. Take care of your health and be very cautious in this dangerous market. Editor's Note: Our colleague Robert Rapier just explained the dismal sector-by-sector performance of the first quarter. Where can you turn for profits in the future? Over the long haul, the biggest stock market winners are companies that defy the status-quo and introduce disruptive new technologies that create entirely new industries and products. As Robert explained, the tech sector fell in Q1 but weathered the downturn comparatively well. We expect tech to not only survive COVID-19, but skyrocket once the pandemic is behind us. Imagine if you had been able to invest in Apple or Google during their infancy. The emergence of 5G wireless technology represents a similar window of opportunity, especially with tech stocks now trading at deep discounts. Want details on how to profit from 5G? Click here for our technology report. |
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