Appearances can be deceiving. If investors looked just at the broad stock market's slow grind for much of this summer, they would have missed opportunities in some recently shunned sectors.
The ended August with its longest streak of sub-1 percent moves in more than two years — 38 days going back to July 11. While the narrow trading range raised concerns about market complacency, a quarter of the stocks in the index actually gained or lost at least 10 percent during that time.
"This has been such a 'risk-on' 'risk off' [market] for the last five, six, seven years that it has frustrated active managers," said Ben Pace, CIO of HPM Partners. "Maybe we're in a position now where there's separation, the stronger from the weaker."
After falling more than 5 percent following the surprise Brexit vote at the end of June, the S&P 500 more than recovered those losses to hit a record high on July 11. In the seven weeks since then, the index has climbed less than 2 percent. The CBOE Volatility Index (.VIX), considered the best gauge of fear in the market, also hit its lowest in a year in August.
Meanwhile, two sectors that suffered earlier this year dominated the outperformers.
Financials, the second-worst-performing sector for the year so far, had a strong showing with State Street up more than 30 percent and Bank of America Merrill Lynch and Morgan Stanley both more than 20 percent higher between July 11 and the end of August.
Tech names such as NetApp, Seagate and Nvidia were also among the S&P 500 components that rose at least 20 percent over that time. The sector was the worst performer in the second quarter.
JJ Kinahan, chief strategist at TD Ameritrade, said as the S&P churned near record levels this summer, investors were primarily rotating among sectors. "As you hit all-time highs, financials were the leaders and you need financials to continue along with tech for us to go higher," he said.
On the other hand, some media, energy and biotech names hit by recent negative headlines were among the worst performers. Diamond Offshore Drilling, Bristol-Myers Squibb and Dollar General all fell more than 20 percent between July 11 and the end of August.
Usually such strong out or underperformance occurs during earnings season, said Howard Silverblatt of S&P Dow Jones Indices. This summer, "it was more related to actual news events, slow trading," he said.
Trade volume in August was the lowest of the year so far.
"We're in a time of 'wait and see' to see what to do with risk," Kinahan said, noting investors would likely remain on edge until the fall earnings season, especially with the September Federal Reserve meeting and November U.S. presidential election.
To be sure, a quiet market could last for a few more weeks. Although September has been the worst month of the year for the S&P 500 since 1950, in election years the index's average monthly decline moderates from a 0.5 percent loss to negative 0.2 percent, according to the "Stock Trader's Almanac."
"Perhaps there'll be more opportunity to beat the benchmark than there has been in the last seven years," Pace said.