The chart below shows the ongoing sector rotation in U.S. equity markets. Highlighted in green are the best performing sectors on a rolling three month basis; red spheres are, relatively, the worst performers. Several trends emerge from this chart; Consumer Discretionary, Financial, Healthcare, Industrial, and Technology sectors have all fallen out of favor recently, while Utilities have outperformed.
Basically the sectors that pushed equity indexes to new highs in 2013, have slowed their pace in 2014. Continued sector rotation will lead to additional “plateauing” in equity markets, but too much rotation out of the Discretionary, Financial, and Technology sectors will certainly create downward pressure. After all, the Utility sector is only 3.09% of the S&P 500 and can only accommodate so much inflow.