Leaders-Laggards

Even though the major averages posted gains last week, it’s the utilities sector that led the market higher (and by a wide margin). We’re finally seeing an extended run of outperformance for all global stocks, both developed and emerging, for the first time in a year. The Bank of Japan finally made a major intervention into the forex market and it looks like 160 on the yen was the breaking point.

The risk-off conditions signaled by utilities outperformance appear to still be intact. Investors realize that a new inflationary trend may be restarting and they’re beginning to position their portfolios accordingly. The only big thing that may be setting up to halt the dollar rally is central bank intervention. Invest in Japan at your own peril!

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.