There was a major reshuffling of sector performance rankings last week, and as always, the story is even bigger than what makes headlines.
None of the changes in the ranking warn of imminent doom, but it does increase my suspicions that the market could peak around the election.
The best way to handle volatility is to be prepared for it. Let’s take a look at the market’s updated box score…
Low-Rate Sectors Find Bid
Real estate popped to claim the one-week leader position, which is interesting given the recent uptick in interest rates we saw.
If you’ve been following along in Theo’s chatroom, you’ll know that I’m looking for an important low in bonds, or a high in rates. If it’s not happening now, I expect it no later than January.
A rebound in bonds would be a major tailwind for both utilities, which are the new leader year-to-date and real estate. Note that utilities seeing another bid here has a lot to do with the unfolding Trinity Trade.
Believe it or not, financials tie into the picture, too. Lower rates would help the banks tremendously with big market-to-market losses.
Yes, the banks have bad loans that were issued back in 2020 and 2021, but they continued to lend into 2022 and 2023. If rates go down, those 2022 and 2023 loans will see major value appreciation. This in turn could help stave off the losses from the 2020 and 2021 loans.
Aside from all this, I’m still keen on the Nasdaq hitting a new all-time high. I’ll keep you posted with other updates this week.
Talk soon,
Gianni
