Leaders-Laggards

Treasuries were up sharply in Q1 and small-caps significantly lagged large-caps, but utilities are still figuring out which way they want to go. There’s a fair amount of underlying weakness here. If the mega-caps falter, it could ignite another wave of interest in safety trades. Of all the markets supporting the idea of an April event, lumber is one of the strongest.

It’s tough to get a read on market sentiment looking at utilities. Tech may be drawing interest from people looking to avoid some of the more economically-sensitive areas of the market. Treasury volatility has really picked up over the past month and, while traditional risk-on/risk-off behavior appears to have returned again, the choppy market action has yet to turn into a sharper risk-off move.

If Powell follows through on what the market thinks it’s going to do and the Fed keeps overcompensating on the liquidity front, this could be a very good time for tech stocks. Much like stocks and bonds moved down in unison throughout 2022, we could be looking at a reversal of that trend setting up now. Lumber is soaring again as added liquidity figures to provide an overall economic boost.