In bull markets historically there’s less of a need, or no need at all, for the safest stocks.
These defensive sectors include areas like Consumer Staples, Utilities, Healthcare and stocks with Low Volatility.
All of them made new 52-week lows on Friday relative to the S&P500:
Here is a look at these same ratios, but flipped upside down.
As you can see, historically when the S&P500 is outperforming these defensive sectors, it happens in healthy market environments.
It’s when these safety sectors are outperforming that stocks in general are usually under pressure:
Notice at the bottom of the chart how Technology, representing over 26% of the S&P500, is making new 52-week highs while those defensive sectors continue to struggle.
If all of these lines are going up, is the blue line representing the S&P500 going to go down?
That’s not a bet that I want to make.
We’re looking for further underperformance from the safest stocks, as there is little to no demand for safety during strong bull markets.
Is that what we’re in?
Is that what this is?
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