Resources versus Banks: Too Early to Tell

Against the run of recent history, resources have outperformed banks during 2015. Since the end of 2014, the ASX small resources share price index has risen by 17.1% while the banks making up the ASX 200 have lost a net 1.9%. Before rushing to a judgment about whether this represents a change in market direction, a historical perspective is worthwhile. The chart shows the relative performance between the two market segments since 1992. Viewed this way, the 2015 performance differential in favour of the resource stocks is barely noticeable. It still needs to run some way before a conclusion about a change in market direction can be drawn. If the 2000-03 experience is any guide, one might be able to (optimistically) infer that the nadir in the resource sector's unfavourable relative performance is getting closer or may be around current prices. Still, the same comparison would imply that several years may have to pass before there is enough momentum created within the resources sector for a meaningful performance differential in favour of resources stocks to become evident.