As we head into earnings season, I’ve been reviewing the performance of different stocks and industry groups over various time periods, including year to date and from the market lows in both March and last November. 

One observation that clearly sticks out in the data is that defensives like health care, staples, and utilities have lagged the market, while companies with cyclical characteristics, particularly technology and consumer discretionary stocks, have outperformed.  Industrials and energy appear to be in line, with no clear trend in relative performance quite yet evident.

As is always the case, the stock prices of some companies are responding nicely to their earnings results (Schwab), while others are giving up some of their recent gains (Intel).  Intel felt comfortable predicting that PC sales had likely reached a bottom and that inventory levels were now generally in line with reduced demand.  Their guidance is for flat results quarter over quarter, which suggests that while they may have seen a bottom, they aren’t yet willing to predict a recovery in growth.  

I am having a difficult time discerning any insights from this navel gazing, but it hasn’t stopped me from trying.  
The only conclusion I can offer is that the markets have done very well in the last six weeks and the performance patterns of the aforementioned industries imply that the market is either beginning to discount a cyclical recovery in the economy or alternatively, the increasing unlikelihood of a second Great Depression.  

With some groups of stocks more than doubling off their lows, I am asking myself if the moves are rational, reflecting the “less bad” environment, overdone, or simply a partial recovery from downside levels that had been ripped by an irrational fear of profligate bankruptcies.    

I wish I could be more decisive, but for now, I’d be bluffing if I were.  So, it’s a push.  I’ll wait to see what new cards are flopped in the coming days.