The outperformance of utilities is getting more pronounced and there’s a good chance that we still may be very early in the cycle. The biggest risk to energy stocks in the short-term remains geopolitical. Treasuries are finally seeing their first meaningful outperformance of stocks since the 4th quarter of last year. The tech stock downtrend is starting to pick up steam and we have the magnificent 7 to blame.

Even as rate sensitive sectors got hammered last week, utility stocks are still holding up fairly well here. If it’s reflation, cyclicals have been leading, but when it flips back over to inflation, tech & growth take over again. The cyclical growth narrative seemed to benefit small-caps to some degree, but investors never fully seemed to buy in, even with a Fed rate cut cycle priced in.

It’s modestly curious that utilities (and gold for that matter) are outperforming as they have while long-term Treasury yields are on the rise. The current environment has been kind to small-caps overall, but progress has been mild and unsteady. Obviously, there’s a big rally in gold happening, but the divergence between it and lumber is growing.