Our Top 10 report was just published. In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
1. Dow Averages Take The Driver Seat
At the index level, the Large-Cap Growth-heavy Nasdaq has felt the burden of the last month’s selling pressure. In fact, all other major indices in the US have generated positive returns over the last month. The Nasdaq is the one negative standout. It’s not that we’re seeing money flow out of stocks. Instead, we’re seeing money rotate between stocks.
We shared this chart and observation in our RPP Report earlier this week. Dow Transports and Dow Industrials were barely impacted by the recent volatility, and both have gone on to make new all-time highs since. This has everything to do with the composition of these indexes. The Dow Industrial Average has a lot more Financials compared to the Nasdaq, and half the exposure to Technology. Transports are an even more extreme example, as they have zero exposure to Technology.
This disparity among the major indexes all comes down to the sector rotation that’s taking place. Until we start to see breakdowns on an absolute basis, this is not a cause for concern. As we’ll discuss below, we’re seeing the exact opposite this week as buyers dig in and defend key levels in the Nasdaq and other indexes.
