Leaders-Laggards

Even as tech stocks turn choppier relative to the broader market, discretionary stocks remain the most consistent outperformer in this market. There could finally be a flight to safety trade slow-building. Lumber prices collapsed over the past year or so and this could still just be a bounce off of oversold levels.

Tech stocks moved steadily higher throughout the entire week, but especially so after the Fed’s hawkish rate pause. While tech and growth maintain control of market sentiment, cyclicals continue to be lifted higher by the demand for risk assets. And just like that, the lumber/gold ratio is at its highest level since March.

Utilities are finally starting to get some action again as the rotation out of tech mega-caps continues. Small-caps are the group getting a lot of attention as the big rotation beneficiary, but this sector, Treasuries and cyclicals are also getting picked up. The dollar has remained in a relatively tight trading range ahead of this week’s FOMC decision.