Utilities have managed to carry forward this powerful move for its third consecutive week, dismissing at least some of the notion that this is simply a one-off bounce. Credit spreads are the one thing that have remained relatively unfazed by growing global macro pressures. If those are finally starting to turn, it could be a sharp decline for junk bonds. Tech volatility remains higher than average as the attractiveness of the mega-cap trade begins to sour.

The past two weeks have easily been the most powerful move for utilities of 2023. While tech and growth have had their ups and downs this year, communication services has been the most reliably uptrending sector of the market. Treasuries are starting to demonstrate some weird behavior. Long bonds continue to underperform, but the time for this group may be nearing.

As long as the markets believe that inflation is cooling and the Fed may be done hiking rates, growth sectors could remain in the lead, but a lot will depend on what happens with August CPI this week and the Fed next week. There’s simply very little concern from investors that default risks are rising as evidenced by higher consumer credit default rates and corporate bankruptcies.