Leaders-Laggards

All of the traditionally defensive equity sectors & strategies are confirming the move in utilities, which suggests this rally may have legs. We’re beginning to see credit spreads move sharply higher again over the past couple weeks and that tends to correlate strongly with gains in Treasuries. Based on other signals, I think lumber/gold is telling the correct story here.

Flight to safety trade continues to build and expand, with health care and communication services leading the way. Technology sector shows signs of instability and weakness, with volatility indicating potential market instability. Credit risks are growing in European banks, while the U.S. dollar shows a flight to safety in motion.

Tech continues to experience some wild swings, which could be an indicator of how confused the market is right now. Treasury yields have continued to soar, essentially amplifying the Fed’s existing tightening cycle, but geopolitical risks may change the near-term narrative. It also has the look of the logical next step for risk assets in a pre-recession environment.