Leaders-Laggards

Tech continues to be an unquestioned leader in this market even in the face of questions about valuations and a lack of market breadth. Investors seem unwilling to believe that there’s even a modest degree of risk in junk bonds at the moment, but they might soon be learning otherwise. Investors may get the impression that everything in the markets and economy are just fine because tech is rallying, but I think small-caps are telling the real story.

Tech has underperformed for the 2nd week in a row following its recent tear, but it’s still a very narrow market. It seems that the more likely it becomes that Trump gets back into the White House, the more that inflation concerns will persist. The wild card is the yen, which looks primed for an intervention by the BoJ at any moment.

The dynamic featuring NVIDIA, however, could prove interesting moving forward. If that stock breaks down here, as it has been over the past three trading days, is it enough to sink investor sentiment? The yen/dollar rate nearly broke through the 160 level over the past few days and puts it in prime position for another BoJ intervention. Lumber’s huge plunge is consistent with the narrative that the global economy is slowing.