Leaders-Laggards

Investors seem a little leery of cyclicals in the face of slowing growth and falling rates, so growth gets the nod again. I still believe that the bond market is pricing in some debt-related risk. The dollar continues to hang on to its short-term gains here, but longer-term risks of a devaluation remain high.

After a choppy four-month stretch of underperformance, tech has firmly come back to lead the latest leg of the bull market. Long-term Treasuries continue to show resilience and could be providing one of the strongest signs that defensive positioning is building in the shadows. I think there’s a genuine possibility that we’re seeing the bottom in the current lumber market correction.

Interest rates again drove the narrative for bank stocks as higher rates translate into higher margins. The commodities correction is clearly having a significant effect here although short-term underperformance is probably a bit overdone. The infrastructure deal announcement had a modestly positive effect on this group, but I don’t think there’s much upside left in infrastructure stocks.