It’s modestly curious that utilities (and gold for that matter) are outperforming as they have while long-term Treasury yields are on the rise. The current environment has been kind to small-caps overall, but progress has been mild and unsteady. Obviously, there’s a big rally in gold happening, but the divergence between it and lumber is growing.

Utilities are joining Treasuries and gold in confirming that short-term conditions actually look more risk-off than risk-on. A lot of the data is suggesting that inflation might be heading higher before it heads lower again. The markets remain unimpressed by the Bank of Japan’s lack of action and the struggles of the yen exemplify that.

Utilities are still holding up relatively well here despite the Fed’s implicit acknowledgment that it’s likely to allow inflation to remain above target. The initial market reaction to last week’s BoJ meeting was a negative one and we now need to find out if the dovishness by both the BoJ and the Fed is a silent signal that something is wrong under the surface.