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"From the chart, we can identify two other distinct periods in which VICE stocks far out-paced the S&P 500. Ominously, those were during the 2000-2002 and 2007-2009 cyclical bear markets. The theory goes that even during dry spells in the market or economy, folks are still going to partake in their particular*“vices”, like drinking, smoking and gambling. It is a speculative theory, but it makes sense and appears to be borne out by the data.Of course, much of the VICE Composite’s relative outperformance during those periods came as a result of the S&P 500´s exceedingly poor performance, rather than the VICE Composite’s stellar performance. However, along with the vice stocks’ relative defensive nature during the bear markets, they also did demonstrate spurts higher coinciding with the previous two cyclical market tops.Is the current spurt higher by vice stocks another of those*“last ditch” rallies prior to the market rolling over? We don’t know for sure. However, the circumstances that exist today are, in many ways, not unlike those at the prior two cyclical market peaks. Now if an investor is involved in these vice stocks, we certainly don’t see this phenomenon as a reason to dump them. However, for broad market investors, it would certainly be preferable if a different set of sectors was currently leading the way."
"From the chart, we can identify two other distinct periods in which VICE stocks far out-paced the S&P 500. Ominously, those were during the 2000-2002 and 2007-2009 cyclical bear markets. The theory goes that even during dry spells in the market or economy, folks are still going to partake in their particular*“vices”, like drinking, smoking and gambling. It is a speculative theory, but it makes sense and appears to be borne out by the data.Of course, much of the VICE Composite’s relative outperformance during those periods came as a result of the S&P 500´s exceedingly poor performance, rather than the VICE Composite’s stellar performance. However, along with the vice stocks’ relative defensive nature during the bear markets, they also did demonstrate spurts higher coinciding with the previous two cyclical market tops.Is the current spurt higher by vice stocks another of those*“last ditch” rallies prior to the market rolling over? We don’t know for sure. However, the circumstances that exist today are, in many ways, not unlike those at the prior two cyclical market peaks. Now if an investor is involved in these vice stocks, we certainly don’t see this phenomenon as a reason to dump them. However, for broad market investors, it would certainly be preferable if a different set of sectors was currently leading the way."
[text] A Potential Sign of a Market Top: Vice Stocks are Outperforming | Dana Lyons
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