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The Second Half Equities Superbowl

The 2023 Superbowl was a great one. It started with a strong first half for the Philadelphia Eagles. The Eagles fans were soaring with delight as the teams headed to the locker rooms. KC fans were dejected by the outstanding performance of Jalen Hurts. With Kansas City down 10 points and Mahomes on a damaged ankle, it looked best to stay with what was working and winning.

Then Rihanna performed the half time show in a larger than life production, complete with floating platforms.

Image by Greg Schnell

In hindsight, it looked like each platform was placed for the odds of an Eagles win. The top of the arc was the half time show and each successive KC touchdown dropped the eagles odds of winning.

In the second half, Kansas City scored 3 touchdowns and Philadelphia scored 11 points to make it a tie ball game with a couple of minutes to go. It all came down to the final field goal, and KC kicked to win with 8 seconds left.

Image by Greg Schnell

It was a thriller. An emotional roller coaster. It came up just short of being the highest scoring Superbowl of all time. It had it all. Foregone conclusions, one sided performances, new names jumping to the top of football lore. It had close calls, bad calls, heartbreaking moments, and stunning redemption.

In a way, it reminds me of the first half of 2023 for the investing landscape.

The first half of investing for 2023

We have seen one of the best Nasdaq first half performances since the 1980’s. The foregone conclusion of a recession has been invisible. One sided performances were in the Mega cap names while other markets like the Russell 2000 didn’t go anywhere.

The technology and discretionary sectors were strong leaders but who expected META in the communications sector to be one of the crazy winners? Meta went from $380 down to $90, and then ran up the field to $290. AI became the new buzz word. Software and semiconductors had their redemption after an awful 2022.

Banks looked like they were going to plummet under the weight of the sudden interest rate increases, but it was a close call that didn’t unwind any further.

The first half of the 2023 investing season was dominated by the large cap players. Apple tagged the 3 trillion dollar market cap on the last play of the half. Compared to the $SPX, the leadership was focused on the first three sectors for a bull market.

I think it is important to notice the industrials and materials were the next best performers. This chart has the growth sectors on the left, and the defensive sectors are on the right. Energy and utilities were the worst but financials and healthcare were not far behind.

The second half group of the growth sectors

Looking in on the next sectors after the winning three, there are some positive signs emerging. An example would be the industrial chart is breaking out to new highs to start the second half.

XLB is threatening to break the downtrend to kick off the third quarter. I’ve used a line chart as there were a couple of extra long intra week price bars that didn’t look like part of the trend. Both charts, bar and line charts, convey the same message. We are close to an upside breakout.

For energy, the XLE (broad energy ETF) doesn’t look as close to a breakout as the XOP (exploration and production) chart. The XOP is breaking out the last couple of days.

Here is the XOP.

The half time show

We are now half way through the year. I’ll be doing the half time show on the monthly conference call at Osprey Strategic on Saturday morning. New clients will be able to listen to recording and can try out everything we offer for just $7 for the first month. My expectation is the next three sectors should make for a fabulous second half and I’ll lay out the reasons why during the conference call and the weekly newsletter.

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