2008 - Bucking the Trends?

The financial crisis and market turmoil of 2008 have prevented many historical trends from holding true this year. For instance, while November and December are typically two of the markets’ strongest months of the year, the performance during those months this year has been far from stellar.

The Dow fell over 5% in November and is on pace for another 5% drop in December. This follows the index’s 14% plunge back in October. In fact, posting a decline in each of the final three months of the year is something the Dow has not done since 1941. For the fourth quarter, the Dow is down 22% - giving it its worst quarter since Q4 1987, when Black Monday struck.

However, one trend that appears to be holding up (at least early on) is the tendency for small cap stocks to outperform large caps during the so-called “January Effect” period (from the middle of December through the month of January). Since 1987, during the last half of December, the Stock Trader’s Almanac shows that the small cap Russell 2000 index rose 3.2%, on average, vs. the large cap Russell 1000 index’s average gain of just 1.7%. The small cap outperformance is evident this year too – since December 15, the Russell 2000 is up nearly 3% compared to the flat/breakeven performance of the Russell 1000 .

As the markets wrap up the year, the Dow (down 36% YTD) is poised for its worst year since 1931. Only 2 of its components are up this year:

  • Wal-Mart up +16% YTD
  • McDonald’s up +2% YTD

GM , Citigroup , Alcoa , Bank of America , and American Express are down -86%, -78%, -73%, -69% and -66% respectively and have been the weakest on the year.

Here’s how some of the other major indices and sectors have performed this year:

As of Monday’s close...

Major Indices
Dow Industrials -36.04%
Dow Transports -27.04%
Dow Utilities -32.66%
S&P 500 -40.79%
Nasdaq Composite -43.06%
Russell 2000 -39.15%

S&P 500 Sectors
Cons. Staples -19.47%
Healthcare -26.78%
Utilities -33.79%
Telecom -35.35%
Cons. Discretionary -37.70%
Energy -37.86%
Industrials -44.27%
Tech -45.41%
Materials -49.20%
Financials -59.81%

Continue for more major sectors indices

Other Major Sector Indices
Biotech -21.53%
Drugs -21.71%
Gold Stocks -22.34%
Consumer -27.93%
Airlines -31.72%
Retailers -34.44%
Defense -35.87%
Natural Gas Stocks -36.45%
Oil Stocks -39.28%
Housing -43.68%
REITs -46.69%
Semis -50.51%
Banks -53.23%
Cyclicals -55.40%
Healthcare -56.86%
Oil Services -61.02%
Insurance -61.56%
Brokers -65.94%

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