Weekly Risk Signals

Instead of delivering a negative shock to the markets with its surprisingly hawkish stance, investors seemed to take the Fed’s messaging as an indication that recession may be further away than thought. Unless, of course, the central bank feels that a recession might be the quickest way to bring inflation back down to earth. It’s interesting to see the yield steepening a bit here.

I find it amazing that there are people who say we're in a new bull market because the S&P 500 is up 20% from its low. Those gains have been driven almost entirely by just 7 stocks. It’s also ironic that this is happening at a time when utilities are showing signs of outperforming again as are cyclicals and long-dated Treasuries. The Fed could be the week’s wild card.

Last week marked at least a modest shift from the “nothing but tech” trend that’s been in place for the past few weeks. While all the signals remain risk-on for another week, this is an incredibly deceptive market where the strengths of the few are masking the weaknesses of the many. The sector to watch here is utilities.