As I am sure most of you know sharemarkets are divided into sectors. For example Financials excluding property is about 40% of the Sharemarket, Materials is about 20%, and Industrials are about 8%.
Sectors do not move in the same direction all the time. Just as you get pricing mismatches, you also get sector mismatches. At times sectors may move cyclically together whilst at other times they are counter-cyclical. Some sectors just simply underperform. Take a look at Telecommunications and Materials below:
click chart for more detail
You can see how Materials has well and truly outperformed in the last couple of years. Backing the wrong sectors is one of the reasons why some investors’ Portfolios underperform.
For that reason it is important to stand back from it all and look at the big picture and make some attempt to see where sectors may be heading.
Just as we can use Elliott and Fibonacci to project a price of a stock, we can also project where a sector may be in one year and which ones will surpass others.
I will be looking at sector projections in my forthcoming free seminar roadshow so I hope you can get along and get a sense of what may be the star sectors in 2008.
Enjoy the ride!