- Health Care made a new high last week and that helped fuel its rise in our relative strength rankings (up to the fourth spot and into the leadership group). Energy and Materials also ticked higher in the rankings, while Consumer Discretionary fell three spots.
- Despite an overall theme of large-cap strength, the industry group heat map shows deteriorating conditions across sizes for the Energy and Banks groups.
- Communication Services and Real Estate swapped places near the top of our relative strength rankings for the S&P 500. While Real Estate strength persists through the equal-weight version of the rankings and down the market cap scale, Communication Services relative strength appears to be more selective.
- Our industry group heat map reflects recent strength among large-cap groups and relative weakness from the mid-cap and small-cap areas of the market.
- Defensive sectors are perking up on an absolute and relative basis. Utilities, Consumer Staples and Real Estate were all positive last week (Staples even made a new high) and they occupy the top three spots in our short-term relative strength rankings. Staples and Utilities are still longer-term relative strength laggards.
- Real Estate remains the top-ranked sector (and is an industry group leader) across the size spectrum.
- Real Estate moved into the top spot in our rankings. It was one of four large-cap sectors to make new 52-week highs last week (the others were Consumer Discretionary, Health Care & Technology). No small-cap or mid-cap sectors made even 13-week highs.
- Financials have been short-term & mid-term laggards, with deteriorating conditions in Banks across market cap levels weighing on the sector.
- The Energy sector fell out of the top spot in our S&P 500 sector rankings last week, though on an equal-weight basis and at the mid-cap and small-cap level, Energy remains the relative strength leader. Our industry group heat map confirms this broad strength within the Energy sector.
- Communication Services and Technology are in the top two spots of our relative strength rankings. Financials and Real Estate round out the leadership group.
Key Takeaway: Indexes made new highs last week, but rally participation has been lackluster. Faltering industry groups and global market trends can make index-level advances short-lived. New breadth thrusts or an Emerging Markets-led rally would suggest downside risks are subsiding.
- The Energy sector reclaimed the top spot in the rankings this week, followed by Communications Services (down one spot from last week) and Real Estate (up one spot from last week).
- Industrials and Materials have dropped out of the leadership group (which is based on rankings over a three-week span) over the past two weeks. Technology and Communication Services have joined Energy, Financials, and Real Estate in the leadership group.
From the desk of Willie Delwiche.
Key Takeaway: Fed-fueled volatility exposes weakness beneath the surface. Breadth trends at odds with index-level resiliency. Drop-in yields and defensive sector leadership consistent with elevated risk environments.
- Last week’s volatility produced a shake-up in our relative strength rankings. Materials and Financials both saw big drops, while Technology and Communication Services surged into the lead.
- Looking beyond the cap-weighted S&P 500 sectors shows a less decisive shift in leadership – Energy & Real Estate remain strong, both at the sector level and in terms of the industry group heat map.
From the desk of Willie Delwiche.
Key Takeaway: Index level highs lack support beneath the surface. Bonds rally in the wake of hot inflation data. Households own relatively few bonds, the Fed has never owned more Treasuries.
- Health Care moved up three spots in this week’s relative strength rankings, but has yet to crack the leadership group. Industrials sector continues to slip in terms of relative strength.
- Both our sector and industry group relative strength studies show Energy and Real Estate as areas of emerging leadership across the size spectrum.
- With Consumer Staples and Utilities still near the bottom of the rankings, it’s hard to make the case for a decisive shift toward defensive leadership in the equity markets.