While the U.S. financial news media is emphasizing that the Dow has hit new highs after the election, investors should not assume that there is an across-the-board rally taking place in stocks. This is not the case at all. In the immediate aftermath of the voting, a significant rotation has taken place in stock sector performance. Some sectors have actually lost ground, while others have rallied so much that they have managed to cause rallies in some of the major indexes. Investors should be moving their holdings out of the underperforming sectors and into those that are outperforming.
First, let's take a look at the performance of the four major U.S. stock indices the week of the election, which took place on Tuesday, November 8th. The big rally occurred in the Russell 2000 (IWM), which is made up of small-cap stocks. It was up approximately 8%. The very large-cap Dow…