Leaders-Laggards

Over the long-term, this could be a sign that the tech sector has tried to grow too far, too fast and now needs to unwind a bit. The housing market is effectively frozen right now, so we’re not getting adequate price discovery and China is still in the process of imploding. Utilities continue to get hit from two sides. The Fed’s insinuation that the street should expect a slower pace of rate cuts in 2024 wasn’t entirely surprising and it did place a drag on financials.

Tech sector continues to dominate, but market expectations reset by Powell could be bad for tech. Communication services sector benefits from gains in Facebook & Alphabet, but market has become narrow. Emerging markets debt levels off, but rate cutting cycles and preference for U.S. assets could provide fuel for outperformance.

Unfortunately for the market, tech is the only sector setting new highs here. This is very reminiscent of what we saw throughout 2023 and the continued lack of market breadth suggests that 1) other sectors, such as small-caps, are demonstrating the real risks of this economy and 2) investors realize that they overdid it on rate cut hopium and are now falling back into old habits.