{"id":239210,"date":"2026-02-18T13:00:00","date_gmt":"2026-02-18T18:00:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=239210"},"modified":"2026-02-19T04:40:54","modified_gmt":"2026-02-19T09:40:54","slug":"an-inconvenient-feature-about-sector-rotation","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/ibkr-market-insights\/an-inconvenient-feature-about-sector-rotation\/","title":{"rendered":"An Inconvenient Feature About Sector Rotation"},"content":{"rendered":"\n<p><a href=\"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/ibkr-market-insights\/strong-currents-under-a-placid-surface\/\">Rotation between stock market sectors<\/a> has been a key topic of conversation this year.&nbsp; Investors are clearly changing their allocations, <a href=\"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/stocks\/an-ai-minefield\/\">sometimes rather violently<\/a>.&nbsp; Broadly speaking, the shifting sectoral preferences have been a boon to value investors but came at the expense of investors who favor growth stocks.&nbsp; Unfortunately, one of the first pieces of investing advice that I received is echoing through my mind: \u201cBe careful when energy stocks lead the way.\u201d<\/p>\n\n\n\n<p>While I have long thought that the <a href=\"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/stocks\/its-better-when-growth-stocks-um-grow\/?query=growth%20stocks%20don%27t%20grow&amp;query_id=c5as_0LjR0K2U6NCRFQvqw&amp;index=engine-name-placeholder&amp;user_token=c5as_0LjR0K2U6NCRFQvqw\">distinction between growth and value<\/a> stocks can be arbitrary, the arbitrary distinction is necessary for comparison purposes.&nbsp; We can see that so far this year, the S&amp;P 500 Value Index (SVX) has substantially outperformed its counterpart, the S&amp;P 500 Growth Index (SGX). &nbsp;On a year-to-date basis through yesterday, while the S&amp;P 500 Index (SPX) was almost exactly unchanged, SVX was up about 3.5% while SGX was down by a similar amount.&nbsp; This is the inverse of what occurred in 2025, when SGX outperformed SPX by about 5% but SVX underperformed SPX by a slightly larger margin.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-year-to-date-normalized-performances-of-spx-red-svx-white-sgx-blue\"><strong><em>Year-to-Date Normalized Performances of SPX (red), SVX (white), SGX (blue)<\/em><\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"950\" height=\"554\" data-src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-91.png\" alt=\"Year-to-Date Normalized Performances of SPX (red), SVX (white), SGX (blue)\" class=\"wp-image-239224 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-91.png 950w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-91-700x408.png 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-91-300x175.png 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-91-768x448.png 768w\" data-sizes=\"(max-width: 950px) 100vw, 950px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 950px; aspect-ratio: 950\/554;\" \/><\/figure>\n\n\n\n<p><em>Source: Bloomberg<\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-2025-normalized-performances-of-spx-red-svx-white-sgx-blue\"><strong><em>2025 Normalized Performances of SPX (red), SVX (white), SGX (blue)<\/em><\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"948\" height=\"555\" data-src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-90.png\" alt=\"2025 Normalized Performances of SPX (red), SVX (white), SGX (blue)\" class=\"wp-image-239223 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-90.png 948w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-90-700x410.png 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-90-300x176.png 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-90-768x450.png 768w\" data-sizes=\"(max-width: 948px) 100vw, 948px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 948px; aspect-ratio: 948\/555;\" \/><\/figure>\n\n\n\n<p><em>Source: Bloomberg<\/em><\/p>\n\n\n\n<p>The outperformance of growth over value has been a theme since the current bull market began in November 2022.&nbsp; We can see from the chart below that the recent resurgence of value vis-\u00e0-vis growth is just a blip on their relative performances since that time:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-normalized-performances-of-spx-red-svx-white-sgx-blue-since-november-2022\"><strong><em>Normalized Performances of SPX (red), SVX (white), SGX (blue) Since November 2022<\/em><\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"939\" height=\"565\" data-src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-89.png\" alt=\"Normalized Performances of SPX (red), SVX (white), SGX (blue) Since November 2022\" class=\"wp-image-239221 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-89.png 939w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-89-700x421.png 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-89-300x181.png 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-89-768x462.png 768w\" data-sizes=\"(max-width: 939px) 100vw, 939px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 939px; aspect-ratio: 939\/565;\" \/><\/figure>\n\n\n\n<p><em>Source: Bloomberg<\/em><\/p>\n\n\n\n<p>You might rightly think, \u201cOK, so value is having a moment. Big deal, every dog has its day.\u201d&nbsp; I could come up with several more dismissive clich\u00e9s, but you should get the point.&nbsp; It\u2019s entirely natural, and in fact desirable, for investors to seek out unloved stocks and sectors rather than continuing to chase winners in perpetuity.&nbsp; The problem occurs when we dig deeper into which sectors are leading the way.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-s-amp-p-500-sector-performances-year-to-date\"><strong><em>S&amp;P 500 Sector Performances, Year-to-Date<\/em><\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"757\" height=\"273\" data-src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-2.jpg\" alt=\"S&amp;P 500 Sector Performances, Year-to-Date\" class=\"wp-image-239220 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-2.jpg 757w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-2-700x252.jpg 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-2-300x108.jpg 300w\" data-sizes=\"(max-width: 757px) 100vw, 757px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 757px; aspect-ratio: 757\/273;\" \/><\/figure>\n\n\n\n<p><em>Source: Bloomberg<\/em><\/p>\n\n\n\n<p>Indeed, we are being led by Materials, followed closely by Energy.&nbsp; That is terrific if you\u2019ve been invested in those sectors.&nbsp; It is far less terrific if you are concerned about inflation.&nbsp; Rising prices of energy and materials create inflationary pressures throughout the economy, even if energy prices are not factored into measures of core inflation.&nbsp;<\/p>\n\n\n\n<p>That was the root of the admonition that I received early in my career.&nbsp; Sectors that benefit from rising commodity prices indicate either that prices in the economy are moving substantially higher or that investors are hedging concerns about incipient inflation later.&nbsp; Since inflation measures are generally not racing ahead, the latter factor is likely the case \u2013 especially with longer-dated Treasuries showing strength this month.&nbsp;<\/p>\n\n\n\n<p>The underlying reasons for the recent rallies in those sectors should be somewhat apparent to engaged investors.&nbsp; We have all witnessed, if not participated in, the stunning rally in precious metals, but that is far from the whole picture.&nbsp; The rush to build and power AI-related data centers will require infrastructure and energy buildouts.&nbsp; Commodity metals like copper and aluminum are certainly required.&nbsp; Although energy prices have been relatively contained in recent months, concerns about Iran-related saber-rattling and weather-driven spikes in natural gas and heating oil have returned energy stocks to the forefront of many investors\u2019 minds.&nbsp;<\/p>\n\n\n\n<p>Does this mean imminent danger for the stock market?&nbsp; Far from it.&nbsp; Might it mean that investors are getting squirrely about the types of factors that could impede economic progress in the intermediate term?&nbsp; Yes.&nbsp; Even today, when stocks are rallying sharply off their test of the <a href=\"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/ibkr-market-insights\/buy-dips-sell-rallies-buy-rallies\/\">lower end of their recent trading range<\/a>, Energy is only trailing Technology by a modest amount thanks to a $2.50 pop in March WTI futures.&nbsp; Concerns abound, but they are not of the immediate variety amidst the current news flow.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-s-amp-p-500-sector-performances-in-2025\"><strong><em>S&amp;P 500 Sector Performances in 2025<\/em><\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"760\" height=\"278\" data-src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-3.jpg\" alt=\"S&amp;P 500 Sector Performances in 2025\" class=\"wp-image-239222 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-3.jpg 760w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-3-700x256.jpg 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-3-300x110.jpg 300w\" data-sizes=\"(max-width: 760px) 100vw, 760px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 760px; aspect-ratio: 760\/278;\" \/><\/figure>\n\n\n\n<p><em>Source: Bloomberg<\/em><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Rotation between stock market sectors has been a key topic of conversation this year.\u00a0 Investors are clearly changing their allocations, sometimes rather violently.\u00a0 Broadly speaking, the shifting sectoral preferences have been a boon to value investors but came at the expense of investors who favor growth stocks.\u00a0 Unfortunately, one of the first pieces of investing advice that I received is echoing through my mind: \u201cBe careful when energy stocks lead the way.\u201d<\/p>\n","protected":false},"author":4,"featured_media":239216,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[14700,18,6,8,9,26,3],"tags":[4524,18335,1059,18118,21163],"contributors-categories":[13576],"class_list":{"0":"post-239210","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-ibkr-market-insights","8":"category-macro","9":"category-north-america","10":"category-region","11":"category-securities","12":"category-text-articles","13":"category-traders-insight","14":"tag-energy-stocks","15":"tag-inflation-concerns","16":"tag-materials-sector","17":"tag-sector-rotation","18":"tag-value-vs-growth","19":"contributors-categories-interactive-brokers"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast 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