Lost in the headlines last week was the fact that the market was all about re-pricing the state of the consumer. Just six months ago, we were facing hysteria about how a recession was imminent, but stocks continued to display their resiliency last week by closing at record highs.
So, what are we really facing? Recession, inflation, stagflation, an economic depression? Honestly, I wouldn’t waste your time worrying about that. Of course, I’m assuming your intent is to make money in this market rather than brag to others about how “right” you were.
Anyways, I have some very interesting updates to share with you this week, and it’s something the bears may not like seeing very much…
A Reshuffling of the Sector Deck
In previous weeks, we noted some of the bearish money flows taking place within the market, but last week, we saw consumer discretionary (XLY), of all sectors, emerge as the top-performer.
To be very clear – this is far from bearish – the market is basically saying that they want to own consumer-based stocks, and if we were able to enter a recession, or face a steep market drop, this simply would not be the case.
It is interesting, however, to note that consumer staples (XLP), a much more defensive sector, was the second-best performer last week. Had it emerged as the best-performer on the week, I’d be singing a much different tune.
Over the past month, and now, year-to-date, we have utilities (XLU) as the top-performer. This is a bit of a concern for bulls, but in reality, XLU is neck-and-neck with tech (XLK) on those time intervals. We’ll need to see some growth-oriented sectors outperform in the near-term to shift this back in favor of the bulls.
But we do have tech as the top-performer over the last year, which tells us that we’re still in a dip buying environment.
As always, I’ll keep you posted.
Talk soon,
-Gianni
