They say history doesn’t repeat itself, but so far this spring looks awfully familiar. Similar to the warm-weather seasons of 2010 and 2011, this weak performance for the major indices in April-May 2012 obscures the bifurcated performance results occurring under the surface. As was the case in the past two years, global cyclicals have registered the worst performance, while defensive, higher-yielding stocks have help up relatively well.
With that as the backdrop, here’s a look at some of the top-performing areas of the market since the most recent high on April 2 (during which time the S&P 500 Index has fallen 8.1%). The common theme here is obvious: The majority of the recent winners are stocks with little or no direct exposure to Europe, some degree of insulation from global economic trends, and a focus on the domestic economy.
Discount Retailers: This group outperformed in each of the last two summers, as investors flocked to a sector that could be expected to benefit from tougher economic times. True to form, the discounters thus far have outpaced the broader market during the most recent spring downturn. Family Dollar (NYSE:FDO), Dollar Tree (NASDAQ::DLTR) and Dollar General (NYSE:DG) have all posted gains through the falling market, as have Ross Stores (NASDAQ:ROST) and TJX Companies (NYSE:TJX).
Generally speaking, retailers with positive stock-specific stories have outpaced the broader market since April 2, as investors have sought safe havens in companies seen as having reliable growth. Amazon.com (NASDAQ:AMZN), Whole Foods Market (NASDAQ:WFM) and Bed Bath & Beyond (NASDAQ:BBBY) are among those that fit the bill.
Travel-Related: Consumer spending is the one theme in which investors continue to have confidence, and this is reflected in the fact that the Dow Jones Travel & Tourism Index has been the best performer among the 99 major industry groups in the past two months. Expedia (NASDAQ:EXPE) and Carnival Cruise Lines (NYSE:CCL) both have performed well, while airline shares have been helped considerably by the sharp decline in the price of oil.
Health Care: No surprise here — health care typically holds up better when the market is falling, and recent weeks have proved no exception. Large-cap pharmaceuticals such as Pfizer (NYSE:PFE), Abbott Labs (NYSE:ABT, more here) and Eli Lilly (NYSE:LLY) have held up exceptionally well and exhibited virtually no sign of the turmoil in the broader market. The large-cap biotechs Biogen Idec (NASDAQ:BIIB) and Amgen (NASDAQ:AMGN) also are among those posting gains, rising 7.2% and 4.8% respectively through Wednesday.
The Usual Defensive Names: All of a sudden, utilities have started to look good again. After lagging during the first quarter — the Select Sector SPDR-Utilities ETF (NYSE:XLU) fell 0.85%, versus a gain of 10.93% for SPY — the worm has turned. Since April 2, XLU’s 0.8% gain has trounced the 8.1% loss for SPY. Dominion Resources (NYSE:D) and FirstEnergy (NYSE:FE) have been among those leading the charge.
Large-cap telecommunications shares also have been winners, with AT&T (NYSE:T) and Verizon (NYSE:VZ) returning 7.4% and 8.8%, respectively. And in the consumer staples sector, the results have been exactly what you’d expect for a sector seen as being a traditional safe haven:
It’s important to keep in mind, however, that outperformance in a down market can be tenuous. Two days ago, the above list would have included the auto parts retailers. On Thursday, however, Advance Auto Parts (NYSE:AAP) issued a worse-than-expected outlook on the second quarter, knocking its shares down over 17% and taking the rest of the group with it. Homebuilders also would have made the list, but they too were hit hard in Thursday’s session. The lesson: Once the market starts heading south, the idea of “safety” only exists until the next headline hits the tape.
As of this writing, Daniel Putnam did not hold a position in any of the aforementioned securities.