Tech Alone Drives Six Straight Up Weeks As The Fed Pivots Hawkish

S&P, Nasdaq Hit Fresh Records on Six-Week Rally; XLK +9.8% On The Week

Below is an assessment of the performance of some of the most important sectors and asset classes relative to each other with an interpretation of what underlying market dynamics may be signaling about the future direction of risk-taking by investors. The below charts are all price ratios which show the underlying trend of the numerator relative to the denominator. A rising price ratio means the numerator is outperforming (up more/down less) the denominator. A falling price ratio means underperformance.

LEADERS: TECH DOMINATES, ENERGY HOLDS 6-MONTH LEAD, GOLD REBOUNDS

Technology (XLK) – The Single Cleanest Leader, Now Accelerating

Technology is the only sector doing meaningful work right now. XLK/SPY is +14.6% one-month, +20.0% three-month, +8.6% six-month, and +24.1% one-year — every horizon positive and accelerating. XLK closed Mon May 11 at $177.88, up 9.8% on the week. The Nasdaq gained 4.0% last week to a fresh record; six of eleven sectors finished the week LOWER, which is the cleanest possible signal that the rally is one sector deep. The April jobs print on Friday (+115K vs 55K consensus, unemployment steady at 4.3%) gave the market a soft-landing read that bid duration-sensitive growth. Trump’s China trade deal commitments holding from November mean rare earth exports keep flowing into the AI capex cycle. As long as XLK leads, the index makes records. The moment XLK rolls over, the rally is over.

Energy (XLE) – 1-Month Unwind Continues, 6-Month Lead Intact

Energy’s three-month ratio vs SPY is now barely positive at +0.75% and the one-month has collapsed to -7.7%, but the six-month at +21.3% and one-year at +8.1% keep XLE in leader territory. XLE closed Mon May 11 at $57.17, down 3.7% on the week as WTI fell from $94.40 to $94.87 Friday on Iran deal hopes. Then Monday Trump said the ceasefire is on “life support” and oil reversed back higher. Brent settled $100.51 Friday but is whipping around. KPMG now forecasts two Fed RATE HIKES this year based on sticky inflation plus the ongoing Strait of Hormuz closure — a regime change from the broader market’s soft-landing pricing. This ratio is the binary one to watch: if Iran deal progresses, XLE rolls to laggard within two weeks; if Hormuz closes again, the 6-month lead reasserts hard.

Emerging Markets (EEM) – The Most Consistent Leader of 2026

EEM/SPY is +3.0% one-month, +6.0% three-month, +13.6% six-month, and +16.8% one-year — the only ratio with green signals across every meaningful lookback. EEM closed Mon May 11 at $65.94. The November US-China trade deal continues to flow through as China removes rare earth export controls and resumes US ag purchases. India and Southeast Asia keep absorbing the energy-importer discount. The DXY weakness adds the currency tailwind. Six consecutive weeks of S&P gains have not stopped EEM from outperforming — that’s the tell that this isn’t a risk-on-vs-EM trade but a structural macro shift. This remains the highest-conviction relative-strength signal entering May CPI on Wednesday.

Russell 2000 / Small Caps (IWM) – Breadth Holding Despite Narrow Leadership

IWM/SPY is +0.4% one-month, +2.1% three-month, +7.1% six-month, and +8.4% one-year. IWM closed Mon May 11 at $285.33, with the Russell 2000 itself setting a new high on Wednesday last week. The fact that small caps are still leading on every horizon despite six of eleven sectors finishing the week red tells you the rally has actually broadened beyond just Mag 7 even though the headline numbers look narrow. Lower oil from the early-May spike reduced input costs for small caps; a steady 4.38% 10-year keeps the discount rate stable; and the better-than-expected April jobs read keeps recession fears at bay. If the rotation extends, small caps will keep the breadth-confirmation signal alive.

European Banks vs U.S. Banks (EUFN/XLF) – Transatlantic Divergence Re-Extends

EUFN/XLF re-established leadership: +0.8% one-month, +5.1% three-month, +14.6% six-month, and +23.2% one-year. The one-year reading is the strongest durable cross-asset signal in this report for the fourth consecutive week. European banks continue to benefit from ECB easing, the lower euro-energy import bill from oil’s recent decline, and equity multiples that started from a lower base. U.S. banks remain pinned by the flat curve (10Y at 4.38%, hawkish Fed dissent against dovish forward guidance) and Basel III endgame uncertainty. EUFN closed Mon May 11 at $38.42. The European Central Bank meets later this month — watch for any signal that ECB easing pauses, which would test this ratio.

High-Yield Credit vs Treasuries (JNK/GOVT) – Credit Beats Duration Continues