Are the Dow Industrials benefiting from trivial weighting? Slicing our Leuthold 3000 universe into market cap deciles shows different performance results than commonly followed market indices.
In 2006, the capitalization weighted S&P 500 was up 13.6%, excluding dividends. The average return for the 500 stocks (S&P equally weighted) was up 14.2%.
S&P 500 Energy weight is misleading. Adding the largest multi-national integrated oil companies to the S&P’s 10% energy weight doubles it to 20%.
The S&P 500’s largest and most rapidly increasing sectors.
Small caps continue to be the market leaders over large caps. This trend is expected to continue into 2005, as our small cap leadership model has recently improved, and is now rated slightly positive.
The near term is becoming more uncertain for Health Care stocks, as HC groups have experienced an erosion in GS Score strength.
We view Health Care as a key theme in 2004. The sector is defensive and sports high growth rates thanks to the large (and growing) demand from elderly Americans.
There was a brief pause last month in our Health Care scores, and we were proceeding with caution. This month, our GS Score work regained some of that lost momentum.
Comparing the sector weights between the NASDAQ and the S&P 500.
Conceptually we think that the big drug stocks are poised to rebound, but they have yet to rank Attractive in the Group Selection Scores.