Top 4 Sectors in January 2023

The new year is off to a great start. The S&P 500 has gained 3.4% year-to-date.

A handful of groups are attracting capital. Our data reveals those trends.

Today, I’ll show you the top 4 sectors in January 2023.

There’s a lot going on under the surface of the market right now. Notably, there’s a surge of buy activity as money is put to work. If you’re only paying attention to major indices, you could be missing the healthy trends developing now.

Last year certain groups were beacons for capital. This year has a different tone with more value-focused areas and oversold groups forging higher.

When sectors attract capital, that means certain stocks are leading. That’s exactly the case now. Many equities are in full-on bull mode! And some of the areas beaming right now may surprise you.

Let’s begin our sector journey.

Top 4 Sectors in January 2023

Last year was all about defensive leadership. Energy, Healthcare and Utilities were hotbeds for capital as turbulence reigned supreme. So far, 2023 has a different vibe. Many of the weakest areas last year are reversing to the top.

But before we dive into sectors, let’s take a look at the daily buys and sells chart. Below you’ll notice the level of buying has ticked up with yesterday returning 132 stocks under accumulation (blue bars):

You should notice that buying has been increasing as selling has dwindled. That tells us there’s money flowing into certain sectors. Here are the 4 sectors attracting the most capital.

First is Discretionary. This group was battered last year as investors worried about the health of the consumer. The Consumer Discretionary Select Sector SPDR ETF (XLY) fell 36% in 2022. Ouch.

That downtrend is reversing in 2023 as capital is flowing into food, homebuilders, and retailers. What was once an area to flee, is looking quite attractive:

Next is Industrials. We’ve been highlighting this group since last year, and the theme continues. Solar, airlines, and machines are thriving. Over 12% of our Industrials universe logged buy signals yesterday:

The number 3 sector for inflows in January is the Materials group. 15 stocks saw buying yesterday, making up 17% of our institutional universe. Metals companies have been surging, flowing to the top of our data:

Finally, and likely the most surprising is the buying going on in the Communications sector. This value-oriented sector sports a trailing 12-month PE of 15.38 and was one of the worst performing sectors last year.

The Communications Services ETF (XLC) fell 37% in 2022. It’s gained 7.5% in 2023 as capital is chasing the oversold sector:

These 4 sectors represent some of the strongest trends in our data. And many of the underlying stocks are in a bull market.

That’s exciting! Focus on the opportunity… it’s there. Unusual volumes are your map of the market.

Let’s wrap up.

Here’s the bottom line: The top 4 sectors in January 2023 are Discretionary, Industrials, Materials, and Communications stocks. Many of the companies are surging higher as capital is being put to work.

Follow the Big Money!

Even with a challenging macro environment, there’s ample opportunity for investors. New trends are forming. We could be facing a healthier market in 2023.

Be receptive when data changes. Use a map to help guide your investing process.

Have a great week everyone!