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Energy's Pain is Consumer Discretionary's Gain

Each week in our Sector Snapshots report, one of the topics we cover is the performance of individual sectors relative to the S&P 500.  Looking at relative strength helps to show which sectors are outperforming and leading the market, which sectors are underperforming and lagging the market, as well as other relationships between sectors.  One notable trend in this week's relative strength charts was the divergence between the Consumer Discretionary and Energy sectors.  As shown in the chart below, just as the relative strength of Energy began to fall off a cliff, Consumer Discretionary stocks took off.

Looking at the above chart, it seems completely reasonable to think that what would be bad for the Energy sector (lower energy prices) would be good for the consumer.  Looking at a longer term chart, however, shows that this has not always been the case.  Taking a longer term look at the relative strength charts of both sectors shows that from April 2010 through the end of 2010, both sectors were outperforming the S&P 500.  In early 2011, however, the Energy sector's performance relative to the S&P 500 peaked while the Consumer Discretionary sector kept outperforming.

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