The level of outperformance for Financials relative to the broader market has been steep and sustained for nearly three months with little interruption. Materials stocks have been steadily outperforming throughout the past couple of months, feeding off of both the rally in commodities as well as precious metals miners. With China locking down again due to COVID, supply chains become a concern once more, but that would appear to be more of a potential longer-term issue to deal with.

The story here is pretty obvious. Even with the breakout in the commodities space, there’s a bit of a failure for the materials sector to break out with it. The industrial sector is participating in the non-financial cyclical rally, pushing this ratio to its highest level since August of last year.

I think governments are nervous about sanctioning the Russian oil industry given how high prices already are. If you’re looking for signs that this is not a full-blown risk-off environment, small-caps could be exhibit #1. Treasuries have simply not been able to gain any ground on equities as would typically be the case if investors were moving away from risk. The demand for dollar liquidity has picked up once more.