From the desk of Willie Delwiche.
Key Takeaway: US stocks are on the ropes after taking a series of heavy hits in recent weeks. This comes against a backdrop of rising volatility and fear, fueling an increase in pessimism. A complete unwind from speculative extremes is underway as a market that once bent under pressure is now beginning to snap. The silver lining is that there are still pockets of strength among cyclical/value sectors, like energy. The question is whether or not this can remain the case in the face of widespread pessimism.
Sentiment Report Chart of the Week: Leadership Rotation Gets Energetic
The energy sector is picking up steam despite the recent selling pressure among US stocks. The sector is having a great month to start the year (+17%) and this week saw one of the largest 1-day return spreads between XLE and XLK on record (22nd overall). In fact, seven of the top 25 events have come since the COVID-related market lows. After taking a backseat to tech for more than a decade, energy led the market last year and is on track to do the same in 2022.
