Leaders-Laggards

Utilities outperformance is starting to get a little long in the tooth here. Bear markets typically see riskier small-caps underperforming the S&P 500, but that’s not what we’re seeing here. International stocks have modestly outperformed the S&P 500 as investors could be searching for better relative value. The Treasury sell-off is accelerating again.

Over the past week and a half, utilities has trailed the S&P 500 by around 4% and could be signaling a short-term sentiment reversal. Small-caps aren’t providing much of a signal as to what current market sentiment is. It looks like the time of Treasuries behaving like a risk-off asset might have faded again.

Utilities took a step back last week during the big bear market rally, but the trend is far from broken. The bond market usually gets it right and I think it’s telling us risk-off isn’t done. Tech looks like it may have stopped the bleeding on underperforming the market, but there’s still a lot of volatility with little progress. Much of the lumber price excess may have been worked out, but I don’t necessarily think another rally is in order.