It may seem as though somebody keeps spamming the toggle button on the 2023 “fear-greed index”, but a few sectors- communication services chief among them- haven’t noticed.
Why investing in communication services?
Well to start with, Jim Cramer hasn’t recommended any of them this year which always helps. But it certainly goes well beyond that as well.
Lowering the volume.
One of the most prevalent trends in this year’s market has been consistent all-time highs in options trading volume- opening the door to higher volatility and larger price swings. If you can recall the viral short squeezes of 2021 meme stocks, you’re familiar with the mechanism behind this volatility.
Well, leading communication services stocks like T-mobile (TMUS) and AT&T (T) have significantly lower trading volumes than the broader market. Volume is measured as the amount of contracts traded during the previous day; today, those measures for AT&T and T-Mobile are 31.7 million and 5.2 million contracts respectively. On the other hand, SPY volume sits at 90.5 million and even that figure is dwarfed by the always popular Tesla’s 166.6 million daily contracts.
A low trading volume certainly does not necessitate upward stock movement. But in the case of this year’s bullish run by the communication services sector, it is one differentiating factor that cannot be ignored.
The other guys.
One of the things we love about Magnifi Personal is the clarity of its reporting.
From the chart above it’s immediately apparent that strong performance from communication services is not the only prevailing trend this year.
Tech and Consumer discretionary (think AMZN) are having strong years while financials- unsurprisingly- round out the bottom of the barrel.