Boston RS Institute: Register to join us in person for a 3-hour educational symposium on relative strength investing. This event is for financial advisors and will offer 3 hours of CFP/CIMA credit.

When: July 24th, 2025, 9 AM EST - 12 PM EST

Where: Courtyard Boston Downtown, 275 Tremont St, Boston, MA 02116

Who: Speakers include...

John Lewis, CMT, Senior Portfolio Manager; Andy Hyer, CFP, CIMA, CMT, Client Portfolio Manager; Ian Saunders, Senior Research Analyst; Michael Silver, Founder and Managing Director of AlphaScale

Cost: Free! Lunch will also be provided.

Registration is limited to the first 75 advisors, so be sure to act fast!

Click Here to Register!

Beginners Series Webinar: Join us on Friday, June 27th at 2 PM (ET) for our NDW Beginners Series Webinar. The week's topic is: Point & Figure (PnF) Basics and Charting Overview. Register Here

The end of June is almost upon us, which means that Q2 is coming to a close. While investors might be happy to see the market back at all-time highs, it took a wild ride to arrive where we are. Given significant movement, we wanted to highlight major sector rotation themes from the quarter. 

Looking at State Street’s suite of sector ETFs seen below, we can get a view of how each major sector did throughout the quarter. Technology Select Sector SPDR Fund (XLK) was the best Q2 performer, gaining more than 20% despite falling as much as 13% at the start of April. Meanwhile, Energy fund XLE is the worst performing sector through the 25th, down more than 9% even with the sector’s positive June with rising energy commodities. One notable trend in Q2 was the outperformance of risk-on and higher momentum areas. Tech, Communication Services (XLC), Industrials (XLI), and Consumer Discretionary (XLY)—some of the most risk-on sectors—were the best performers. Meanwhile, Financials and Utilities (each top five in DALI entering Q2) were the next best sectors while laggards like Healthcare and Energy were major drags.

The performance of the major sectors mirrors much of the movement within our DALI sector rankings over the last quarter. The current top five sectors within DALI are the same five at the end of last quarter, highlighting the general stability of the market’s leaders. However, Technology did briefly fall to seventh in April before eventually returning to the top five, and it is now within one signal of moving back ahead of Utilities. Consumer Staples was the biggest DALI riser in Q2, gaining 29 signals within DALI’s sector rankings. Flight to safety during the peak of market tariff fears saw the sector move from last place to sixth before eventually falling to the eighth rank with the market returning to its risk-on posture. Basic Materials also gained 22 signals—the 2nd most of any sector—largely due to strength from metal miners. Meanwhile, the Discretionary sector lost 15 signals with small caps and homebuilders causing the brunt of the damage, dropping it behind Materials. However, it was Energy that was the quarter’s biggest loser, shedding 21 signals throughout the quarter to fall to last place in DALI. Meanwhile, Healthcare and Real Estate round out the 10th and 9th spots after losing further strength. Overall, it was a solid quarter for high relative strength sectors, which is a positive sign for the rest of the year.

As covered in Wednesday’s report, the Nasdaq-100 (NDX) reached a fresh intraday high this week just 126 days after setting its last record, pulling back more than 25% in the interim. The S&P 500 (SPX) is also on the verge of hitting a new record as it traded above 6140 on Thursday.  Given the speed of the decline and the recovery, it seems likely that many people may have missed the opportunity to “buy the dip” and with stocks now trading back near all-time highs, may be hesitant about putting any money into the market.

We can certainly understand this sentiment – the market made a V-shaped recovery from a significant drawdown but there has been little progress to resolve the underlying cause of the sell-off, namely the Trump administration’s reciprocal tariffs, which are theoretically set to resume in roughly two weeks. Meanwhile, from a technical perspective, the S&P is now in heavily overbought territory with a weekly overbought/oversold (OBOS) reading north of 70%.

We’re certainly not advocating for this being an ideal entry point – from both a fundamental and technical perspective, where are reasons to be concerned about how much higher the market can go in the short-term. But, over the last 35 years, there have been few truly “bad” times to put money into the market. As we have discussed previously, over the long-term time in the market generally works in your favor which also why you’ve typically been better off to go “all-in” rather than “averaging in”.

As technicians, we don’t promote a “buy-and-hold the S&P 500” strategy. We believe there is benefit to be had by rotating between areas of relative strength and adjusting your level of exposure based on the market environment. But, if you have clients who would prefer to sit on their hands unless everything seems perfect, it can be helpful to show them that historically, even less-than-ideal entry points have better than sitting on the sidelines.

The image above shows the annualized returns for the S&P 500 Total Return Index (TR.SPXX) for every year from 1990 through 2024. So, for 1990 (12/31/1989 start date) we have 35 years of returns, while 1991 has 34 years of returns, and so on. The annualized returns for 1990 run across the top row, the returns for 1991 run across the second row, etc. As you can see, the returns for most start dates are positive within a couple of years.

There are a few periods where the returns are negative for several years – mostly for start dates around 2000 – 2002 and around 2008, showing that these outsized and multi-year drawdowns can have an impact even over a multi-year horizon. At year 25, the annualized returns for the 1998 - 2000 portfolios sit at around 7.7% lagging the 1997 portfolio by about 2%, a significant difference when you consider it amounts to more than 60% on a cumulative basis. However, while less ideal that 7.7% annualized return is significantly better than what would have been earned sitting in cash.

And as you can see, there are relatively few “bad” starting points. The 2007 portfolio, started just before the Great Financial Crisis has an annualized return of more than 10% 18 years later and the 2022 portfolio, which started just before a major drawdown, now shows an annualized return of almost 9%.

It is also worth noting that these are simple buy-and-hold returns, investors who took a tactical approach and avoided tech stocks during the dot com crash likely show significantly better long-term returns than the late 90s sample portfolios shown here. 

Daily Option Ideas for June 26, 2025