And the Last Shall be First

Chasing last year’s winners is a mistake investors often succumb to in a new year. They may look at their 401(k) statement and investment lineups and question why they didn’t invest in this area or that area. It is beneficial to review and reconfirm your investment choices, but blindly chasing after the winners and sometimes selling your underperformers can cause even more regret.

This becomes apparent if we look at the domestic sector weightings in the S&P 500. Last year saw an almost 100% performance difference between the top and bottom sector. The bottom sector was communication services which was down nearly 40%. This year communication services is leading the way, increasing a whopping 22.49% year to date. The second worst performing sector was consumer discretionary down 37% and you guessed it, they are the second-best performing sector in 2023 increasing 17.16%. The table below shows the dramatic change in sector leadership this year.

S&P 500 Return

Data as of market close 2/7/23

Some of our views stay consistent with the previous year such as our belief that value outperforms growth. However, we did make some adjustments, becoming neutral on international equities and becoming more favorable on small cap stocks. We also believe bonds will have a positive year, rebounding from two straight down years. Our philosophy is to not chase the winners nor is it to be a true contrarian. Rather, we have a process for reviewing each asset class and determining how much capital to add or subtract from those areas.

Source: S&P, Wisdom Tree

The opinions expressed are those of Harrison Financial Services as of February 10, 2023 and are subject to change. There is no guarantee that any forecasts made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment or security. Please remember that all investments carry some level of risk, including the potential loss of principal invested. Indexes and/or benchmarks are unmanaged and cannot be invested in directly. Returns represent past performance, are not a guarantee of future performance and are not indicative of any specific investment. Diversification and strategic asset allocation do not assure profit or protect against loss.