Hello TheoTrader,
As we enter the second full week of trading in 2025, the timeline may have shifted slightly, but the underlying story remains the same: we’re in a bull market.
Sector performance rankings saw a notable shake-up last week. While much of the movement is bullish, there’s one minor concern—but only in the traditional sense (you’ll see why shortly).
The weekend was dominated by DeepSeek headlines, and this week promises to be action-packed. Between the Fed, key economic data, earnings reports, and headline risks like geopolitics and tariffs, there’s plenty to watch.
The big question: will these factors push stocks meaningfully lower, or will the market’s internal capital flows continue to prevail? Let’s dive in…
Moving With the Market’s Rhythm
There’s some tension in the markets this morning, so let’s focus on where the bad news is coming from at the sector level. Utilities (XLU) have been the top-performing sector in the S&P 500 over the past year—a trend that has traditionally been seen as a cautionary signal.
Utilities are considered defensive since they’re among the last bills people stop paying during economic slowdowns. Artificial intelligence is dominating headlines again today, and much of the recent outperformance in utilities has been linked to higher power demands from data centers.
Which brings us to the most dangerous question in this business: “Is this time different?”
Now for the good news: communications took the top spot for one-week performance, and industrials have overtaken energy as the year-to-date leader. A few weeks ago, I warned that energy’s outperformance looked like a bottoming signal, and while stocks are down sharply today, the January 13 low is still holding.
To be clear, communications and industrials climbing the rankings isn’t bearish. This week will give us a classic example of what to trust: the news or the money flows.
I know where I’m placing my bets—and as always, I’ll keep you updated if anything changes.
-Gianni
