The fourth quarter started off with stocks under pressure leading up to the November 8 U.S. Presidential election. After the election, the S&P 500® Index experienced a 4.6% rally, led by sectors previously out of favor such as financials and industrials.

S&P500 Index Sector Performance

Investor sentiment changed dramatically in the second half of the year and this change only accelerated after the election. Formerly favored high-dividend paying sectors such as utilities and consumer staples underperformed other sectors that had better growth prospects given the pro-business/pro-growth platform of the winning candidate. Sectors that had previously seemed like a defensive destination for investment dollars continued to lose luster in favor of lower-yielding ones. This quick change in market sentiment is a good reminder that over the long-term, a well-diversified portfolio allows investors to capture the market’s sudden twists and turns much better than a concentrated bet on a few sectors.