What If We Get Rotation?

JC Parets
May 31, 2023

This is the big question for me right now. Do we get rotation into the sectors that led this market off the lows last June?

We'll be discussing it on our NEW Morning Show today. Make sure to catch us LIVE from 830AM - 10AM ET using this link.

First, here's what I mean.

Check out these 3 Index Funds that have been underperforming this year. Financials and Small-caps flirting with last summers lows, and I threw Industrials in there too as a representation of the more Value areas of the market:

I think we need to see some kind of rotation soon.

It doesn't need to happen today, but I do think we need to see it in the near future.

Here is the Sector performance for 2023. And I'm not anchoring to the beginning of the year randomly. I chose this anchor date because that's about the time that these relative strength trends changed:

As you can see, Technology, Communications and Consumer Discretionary are the leaders by a long shot.

Compare this year's performance to the back half of 2022, after the New 52-week lows list peaked in June.

It was a much different tape during the final 2 quarters of 2022 compared to this year so far:

Notice how Technology, Communications and Consumer Discretionary were the biggest laggards last year.

So now in 2023, can Technology and these other Growth sectors continue to be the leaders for the rest of the year, and beyond?

Yes. Definitely.

BUT, I don't think we're in a healthy market environment if these Index Funds in the first chart, Small-caps, Financials & Industrials, are breaking down to new lows.

So I'll ask again: Do we get rotation?

And what happens if we don't?

Feel free to chime in here. We love to hear from you.

Also come join the chat and weigh in during our Morning Show Today.

Click here and come hang out at 830AM ET.

We have some very special guests dropping by. See you there!

JC

 

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