Leaders-Laggards

The discretionary sector continues to perform as a nearly uninterrupted market leader over the past two months. Energy stocks are taking a bit of a healthy breather following a huge two-month run that has seen the sector outperform the S&P 500 by more than 25%. Financial stocks remain highly correlated to interest rates and that’s allowed them to push higher with few hiccups lately.

After struggling with the rotation out of the growth trade, consumer discretionary stocks have come roaring back. Energy prices remain high and that’s been more than enough to keep energy stocks in their familiar leadership position. Industrials remain perhaps the weakest of the cyclical sectors here, but they’re managing to still create a nice little run of their own lately.

Energy is still the hot sector to own. Industrials again participated in last week’s cyclical leadership, which is a good sign for the sustainability of this trend. Small-caps look a little weaker than I’d expect. If Treasuries yields continue to move higher here, there’s a good chance we see the value of the dollar rise as well.