High Beta outperforming Low Volatility stocks is usually something we see in healthy market environments.
This year, however, High Beta has been struggling to make any progress vs their Low Volatility counterparts.
"Beta" is essentially how volatile a stock is relative to its benchmark.
So High Beta think $SMCI, $NVDA, $AMD, $AVGO and others. You have half the S&P500 High Beta Index in Technology and another 17% in Consumer Discretionary.
In contrast, for Low Volatility think Berkshire Hathaway, Coca-Cola, Visa, Procter & Gamble. You'll find a lot of Financials, Consumer Staples, Utilities and Industrials in this group.
Here is the ratio of High Beta vs Low Volatility breaking down to the lowest levels all year.
This breakdown in High Beta / Low Vol comes in an environment where we have yet to see any real meaningful expansion in stocks hitting new lows.
You can't have a bear market or a correction of any kind without the prices of stocks falling. And we haven't seen that yet.
Check the new 1-month lows, new 3-month lows, new 6-month lows. You'll see.
And don't even bother with new 52-week lows, because they're non-existent.
Financials actually hit new 52-week highs this week relative to the S&P500. That's not historically a bearish characteristic, despite what may be happening in High Beta.
Take a look at Consumer Discretionary on a relative basis. Its inability to break down and complete this massive top is definitely constructive for the overall health of the market:
If Consumer Discretionary can get going here and finally start to outperform the rest of the market, it's hard to take that as a negative.
Quite the opposite, in fact.
Keep a close eye on Amazon, Tesla and Home Depot, which together represent almost half of the entire S&P Consumer Discretionary Index.
