Leaders-Laggards

Utilities are no longer outperforming with the strength they did in July, but I don’t think it’s an accident that this is still the best performing sector year-to-date. As long as TIPS are outperforming Treasuries and gold is setting new all-time highs, I think we need to acknowledge that inflation is still a risk. It’s been an impressive comeback for the dollar, fueled by rate cut expectations getting progressively downplayed.

Tech is finally starting to build some momentum again after getting a bit lost in the shuffle of a cyclical rebound. I don’t think we should ignore the fact that TIPS have been outperforming as strongly as they have over the past month. The potential in emerging markets is still significant, but clarity from China would be a good thing.

Tech is no longer the market leader it once was. Energy stock prices have finally shot higher, but it’s not due to an organic increase in demand. It’s impossible to look at this chart and ask why utilities are doing so well while U.S. equities are rising the way they have. Even as the Fed cuts interest rates, a continuation of the resilient economic numbers should prevent the greenback from falling too far.