Leaders-Laggards

Credit spreads have come way down from where they were pre-Liberation Day, which means investors have largely written off any possibility of short-term risk. It’s interesting to note that utilities is still the best-performing S&P 500 sector year-to-date. In a deregulation push, however, I could see the healthcare sector doing quite well.

At this point, it’s almost impossible to figure out whether the White House feels progress on the trade front is being made or not, which probably means more whipsaws for equities. So far, spending and the jobs market are holding up, but cracks are starting to show. When equities, bonds and the dollar all move sharply lower together, there’s something disconnected in the market and that’s exactly what we’re seeing here.

It’s unclear as of yet whether or not inflation will still be an issue in this environment given April’s below expectation reading. I’ve said recently that now might be the time for small-caps to outperform given how easing trade tensions should improve the investment case for them. We have been stealthily seeing that narrative play out over the past few weeks.