Editor's Note: This article was originally published in John Murphy's Market Message on Friday, September 28th at 12:29pm ET.
The three strongest sector leaders since the start of this year have been consumer cyclicals, technology, and healthcare (in that order). But those numbers don't reflect the fact that healthcare has become the strongest market sector over the past three and six month periods. In other words, healthcare is the new market leader. The three relative strength lines in Chart 1 represent consumer cyclicals (blue line), technology (red line), and healthcare (green line) since the start of 2018. All three are plotted against the S&P 500 Index (flat line). So their rising lines represent strong "relative performance". The two top lines have clearly been the top performers since the start of the year. Since May, however, the healthcare relative strength ratio has risen much faster than the other two. Since its May bottom, the healthcare sector has outperformed consumer cyclicals by 6%; and has outpaced technology by a bigger margin of 8%. Healthcare has also outperformed the S&P 500 by an even bigger 10%. Yet healthcare still remains much cheaper that the two other 2018 sector leaders.
Chart 1
