Leaders-Laggards

Staples, and more broadly low volatility stocks, have both been outperforming their riskier counterparts since February. Tech remains one of the bigger false positives in the market right now. there’s a lot more money moving into international equities here (both on an absolute and relative basis) than U.S. equities. Gold is also rallying hard, which may be a function of investors starting to hedge their bets ahead of the debt ceiling deadline.

Tech is still a “safe place” for some investors, but the volatility is concerning. It is a bit interesting to see junk bonds lagging Treasuries here, an asset class that really hasn’t done much lately in its own right. Utilities are usually a good proxy for short-term sentiment, but it hasn’t really given us a good signal throughout 2023. Last week’s jobs report dropped the hammer on Treasuries once again.

If you look at the performance of consumer staples relative to discretionary stocks and low volatility relative to high beta, you get one of the more decisive risk-off signals in this market. Tech stocks got a big boost last week from positive mega-cap earnings reports, but that may still be masking underlying weakness. The dollar looks like it’s finally starting to establish a bottom here and it kind of makes sense.