How does S&P 500 sector performance align with the ISM?

A disappointingly small rebound in the headline index of the US ISM manufacturing survey for August appears to have put some relative pressure on cyclical sectors of the S&P 500 today, which is down more than 1% the time of writing. The bigger picture, though, is that ‘pure’ cyclical sectors have outperformed defensive ones on net since the end of 2022, despite a further big drop in that headline manufacturing index. The upshot is that investors are either still too upbeat or, as we suspect, the ISM manufacturing survey is too gloomy.