As of this blog post, the stock markets are firmly green for the year. However, it has been a very choppy year for investors. The broader stock market indices are up but many companies/stocks have seen significant drawdowns from their early year peaks, with many still firmly negative on the year. The rotation of sectors and stocks under the hood has made stock picking difficult, unless you held the short list of names that have pulled the broader averages higher. In 2021, being more broadly allocated and diversified has proven to be a winning formula after a strong stock market recovery from the pandemic lows last year. Liz Ann Sonders, the Chief Investment Strategist at Charles Schwab, provided two charts that summarize the market digestion this year.
2021 Stock Market Churn and Chop
Liz Ann Sonders (Charles Schwab): Lots of talk about how resilient “the market” has been this year; reality is 91% of S&P 500 companies have had at least a -10% correction from their highs YTD, and the average drawdown has been -18%. So headline/index “strength” has masked incredible churn and choppiness beneath the surface (especially for NASDAQ & Russell 2000).
2021 Fickle Sector Leadership
Liz Ann Sonders (Charles Schwab): Unfriendly macro environment persists, over the past year, sector leadership shifts have been swift and large. There have only been 2 consecutive months (Jan-Feb 2021) when the same sector (Energy) has been top performer.