Leaders-Laggards

Investors have slowly pivoted away from long-term economic growth optimism and focused a bit more on short-term challenges. Last week’s underperformance from cyclicals based on weak jobs data makes these sectors worth watching. The strength in the current small-cap rally is formidable.

The cyclical rally has taken a pause over the past several trading days and recent economic data hasn’t necessarily been supportive. Lumber is certainly signaling that the good times are back. Treasuries are finally starting to capitulate a little in the face of the current stock rally.

Energy stocks continue to roar back as the holiday travel season has shown us that many people aren’t afraid to hit the roads and airports. Small-cap and cyclical outperformance is exactly the type of intermarket activity you want to see in an economic recovery scenario. Tech stocks continue to underperform for the most extended stretch since late 2018.