The correlation between the best and worst performing sectors of economy is necessary to be thoroughly analyzed in order to formulate the investment strategy and get the largest profits. There are some important similarities between leading industries. That is why it is useful to compare them for the purpose of understanding the main economic trends. The rating of the best and worst performing sector may be explained by the impact of the different factors that should be also briefly overviewed.
Question1
According to the graphic presented by Investopedia the best performing sectors are non energy minerals, consumer non durables, commercial services, transportation, and industrial services. The worst performing sectors are health technology, utilities, health services, energy minerals and consumer durables. It is interesting to notice that the traditional spheres of manufacturing or service rendering lost their positions significantly. The performance of the energy minerals industry has also decreased. At the same time the competitiveness of the non energy minerals including gold shows growth. The sphere of manufacturing of the soft goods (consumer non-durables) presents better performance than the consumer durables. At the same time health industry performance is really bad. The performing of the service industries such as logistics (transportation), industrial and commercial services is rated to be the best due to overall growth of the service industry all over the world.
The volume of the industries and the percentage changes should be obligatory taken into account in order to gain up-to-life results. Therefore the volume of the energy minerals industry is the largest one despite the decrease of 0.19 percent. It means that the high industry performance of the previous years and the volume of manufacturing make the industry remain significant. At the same time despite the percentage growth of 0.51% the volume of consumer durables is considered to perform the worst due to small market volume. The best performing industry of non-energy minerals has grown for approximately 1.51%. It is really good results due to the fact that three others best performing industries increased for approximately 1%. The percentage losses of the worst performing sectors for all industries were lower than 1 %.
Question2
Now for active traders it is time to invest in gold as the sector of non energy minerals has evolved significantly. The factors of influence are specific economic conditions such as low growth, negative interest rates and the resulting loss of confidence in the effectiveness of Central Bank policies. The prices are fueled higher. The white metals such as silver, platinum have also shown the increased industrial production and global growth. The giants of the transportation industry have achieved better performance due to the implementation of innovations and successful mergers within the industry. The consumer non durables enhanced the performance due to the large size of the US consumer market in general. The oil embargo imposed by OPEC and other political issues leaded to the worsening of the energy minerals sector. Such situation lasts for several months. Other changes in the interest rate and several laws adopted for regulation of the healthcare industry have influenced the performing of the industries.
Question3
There is rather strong correlation between the activity level and the performance level of the industry. Therefore all the best performing corporate have the increase of activity. The tendency of the direct correlation between the performing and the activity level is the same for the worst performing industry with the exception of the consumer durables. This exception may be explained that the growth in activity of 0.5% was not significant and the smallest volume of this sector only worsened its level of performing. The performing level is calculated on the basis of comparison of the current state of performance with the one relating to the previous periods. That is why the delta of performance is almost equal to the percentage changes. So the strong correlation between the performance level and activity changes exists for the most cases depicted by the graphic.
Question4
It is quite interesting to notice the fact that there is no evident correlation between the level of the sector performance and the volume of the production. Although the volume of the best performing industries is quite small, they remain to be fast growing. For instance, the volume of the consumer non durables is only 3.11 that is not so significant amount comparing with the industries that were considered to have the worst performance. At the same time the correlation may be found in case we compare the two interrelated sectors producing consumer goods such as consumer non durables with the consumer durables. One of these sectors is listed to perform the worst and another is to perform the best. That is why the volume of production of the consumer non durables is more than twice larger than the consumer durables. (3.3 comparing to 1.6)
At the same it should be noted that the volume of the industry depends on the various factors including governmental spending, amount of available resources of the country and the traditional spheres of economy. That is why the industries with the largest volumes may have really bad performance. In this case the innovations should be implemented in order to support the growth of these sectors or to cut the volume of the production.
Question5
The information received from the graphics of best/worst performing sectors of economics is used by traders and institutional investors in order to make decision in which industry the money should be invested. The investors are interesting to make financial investments into the best performing sectors. At the same time the market volume and the changes in the activities if the industry should be also taken into account. The trader should collect additional data in order to understand whether the tendencies of the industry performance will remain the same in context of the long-term perspective. Furthermore sometimes investors may choose the worst performing industries if it is forecasted that the specific factors may change the situation for the better in future within these industries.
References
(2016, May 09). Retrieved from Investopedia: http://www.investopedia.com/markets/sectors/
Lim, P. (2016). The Bible of investors. New York: Economic Press.
Now it is time to buy gold. (2016, May 09). Retrieved from Investopedia: http://www.investopedia.com/stock-analysis/cotd/050316/now-time-buy-gold-abx-gg-abx-gg.aspx
