Leaders-Laggards

Crude oil prices have stabilized as the U.S. begins imposing geopolitical sanctions that could tighten global supplies, but demand is the real story here. The VIX is still elevated and there’s little sense that the overall mood of the market is changing as long as the trade war and the resulting economic uncertainty are present.

The current strength of outperformance in dividend stocks matches what we saw during the first reverse yen carry trade last summer. Historically, the U.S. economy has entered recession within about 12 months of the 10Y-2Y Treasury spread flipping positive. That happened back in September and it looks like we could see that play out again.

Utilities have pretty consistently been signaling risk-off throughout 2025 and that trend appears to remain firmly in place. Now that it’s getting the support of other defensive sectors, value, low volatility and Treasuries, there’s a good chance that this trend has an opportunity to push higher for longer. Bonds are finally starting to rally here and look more like a traditional risk-off asset every day.