I love bull market corrections. Oh, don't get me wrong - as an investor I hate the damage they can inflict on portfolios. As an academic observer though, I love the 'shuffle' action they prompt afterwards, sending new leaders to the head of the class while the old leaders suddenly start struggling to keep up. This is when sector rotation becomes most apparent, and most important.
Know where this is going? Since the May 20, 2010 blowout selloff, we've seen a surprising new set of leading sectors, and some suspiciously missing old leaders.

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Numbers don't Lie
Using the iShares broad sector ETFs as our proxies, we can compare their performances over two timeframes. The first one is from March 6, 2009 - April 23, 2010. The second one is from May 20, 2010, June 16, 2010.

iShares Fund Ticker Percentage Return: March 6, 2009 - April 23, 2010

iShares Fund Ticker Percentage Return: May 20, 2010 - June 16, 2010
Financial IYF 150.60% Basic Materials IYM 7.70%
Basic Materials IYM 126.30% Utilities IDU 5.70%
Industrial IYJ 112.60% Energy IYE 5.60%
Technology IYW 94.00% Telecom IYZ 5.20%
Services IYC 91.40% Technology IYW 4.90%
Consumer Goods IYK 60.90% Financial IYF 4.20%
Energy IYE 56.30% Services IYC 4.10%
Telecom IYZ 48.10% Healthcare IYH 3.70%
Healthcare IYH 44.30% Industrial IYJ 3.50%
Utilities IDU 36.30% Consumer Goods IYK 2.60%

Three of the top four performers since May 20 were three of the bottom four (out of 10) between March of last year and late April of this year. That's the iShares Dow Jones US Utilities ETF (NYSE:IDU), the iShares Dow Jones US Energy Sector Fund (NYSE:IYE) and iShares Dow Jones US Telecom ETF (NYSE:IYZ).

Even more up-ending, three of the top five sectors between March of last year and April 23, 2010 are in the bottom half of performers since May 20. Those names include the iShares Dow Jones US Financial ETF (NYSE:IYF), the iShares Dow Jones US Industrial Fund (NYSE:IYJ) and the iShares Dow Jones US Consumer Services ETF (NYSE:IYC).

What does it Mean?
There are two likely questions you've got bouncing around in your head about the data above. The first one is, don't sectors come and go all the time? The second one is, so what?

Yes, sector rotation is an ongoing thing, but no, it's a rarity to see a complete switch-up like this in such a short period of time. This is a paradigm shift. If you were steering clear of boring utility and telecom stocks, now's the time to warm up to them again. If you were loving those big returns from your financial and industrial stocks, that party may be over.

The arguable response is that four weeks' worth of 'trend' isn't really much time to make this kind of determination. I'll be the first to acknowledge I'd like to have more data, and that I'm not outright married to the apparent trends. Four weeks isn't exactly a short period of time either though; if the old trend were going to resume, we would have seen at least a little evidence of that by this point in time.

And in the bigger-picture, these new trends have some longevity, because the nature of the new leaders jives with renewed worries of a double-dip recession.

The Bottom Line
Utilities? Telecom? Energy? All three are reliable businesses with strong cash flow, and often, strong dividends - the kind of stuff that looks attractive when the market stinks. Financial and industrial stocks are among the first to suffer (and the most) in hard times, which may be right around the corner. (To learn more, check out Sector Rotation: The Essentials.)

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