Leaders-Laggards

Crude prices continue to head higher, which has been bullish for the energy sector, but it’s worth wondering if the oil rally has gotten a bit overdone. Small-caps continue their impressive leadership as conditions remain favorable for further outperformance. Rising inflation pressures could compel the Fed to at least think twice about keeping conditions ultra-loose. That would likely be negative for risk assets, but positive for dollar strength.

Tech continues to lead the newly rediscovered growth rally higher along with the communication services sector. The rebound in the dollar continues as the idea that the government will provide enough financial support to get us to the other side of the coronavirus pandemic builds. Treasuries have mostly remained resilient throughout the equity bull market, but it’s looking like that multi-decade bond bull market may be sunsetting.

After six months of consistent underperformance, consumer staples finally show a little life. Dividend stocks mostly held tough despite the weakness in cyclicals that tend to be overweight in these portfolios. Euro financials matched the underperformance of U.S. financials as cyclicals worldwide lagged.