Recent market observations and monthly sector charts are suggesting that while market volatility remains high, the downside risk for many sectors is limited.
The S&P 500 is currently down roughly 6% from its all-time highs and nearly 30% from its peak levels in February of 2020. This is a very sharp decline, and investors should remain wary of short-term trading and take a more balanced approach when looking at the global markets.
However, recent sector performance would suggest that there is limited downside risk given the degree of volatility that we are currently seeing. The Global Manufacturing PMI index has risen in the past few months, suggesting improved conditions for the industrial sector. In addition, the Consumer Staples sector has held up well, indicating investors remain cautious around their consumption habits.
In terms of other sectors, the Technology, Energy, and Financials have all seen strong gains in recent months, suggesting that the downside risk in these sectors may be limited. On the other hand, the Healthcare and Utilities sector have seen more moderate gains since the begining of 2020, highlighting the importance of sector allocations when making portfolio decisions.
When looking at monthly sector charts, we can also get a good idea of where certain stocks and sectors will be heading in the upcoming weeks. The Business Software and Services sector has seen a steady rise since March, indicating that a continued uptrend could be expected in the near future.
On the whole, recent market observations and sector performance suggest that while there is volatility in the markets, the downside risk is limited in several sectors. This is a positive sign for investors, who should stay informed and remain patient when it comes to portfolio decisions.
Taking the long-term view, sectors are likely to continue to experience changes and adjustments as we move further away from the pandemic. Although, having a well-diversified portfolio, and being aware of the volatility of markets, can help investors minimise the risks, and remain flexible during periods of change.