If you look at the performance of consumer staples relative to discretionary stocks and low volatility relative to high beta, you get one of the more decisive risk-off signals in this market. Tech stocks got a big boost last week from positive mega-cap earnings reports, but that may still be masking underlying weakness. The dollar looks like it’s finally starting to establish a bottom here and it kind of makes sense.

I’d like to see a little more conviction out of utilities before getting more comfortable saying this is a trend, but it has been tilting in that direction. Equity investors appear satisfied that bank liquidity issues are largely resolved. The huge tech rally that dominated the 1st quarter of 2023 has come to an end. Government bonds are again struggling to confirm the risk-off trade.

Utilities continue to signal that short-term sentiment is very hot and cold based. The bottom in financial stocks looks to be in and the earnings results we got last week from JPMorgan Chase and Citigroup are likely to reinforce investor confidence further. With regard to bonds, conditions are favoring the return of the “recoupling” narrative soon. Lumber could signal one final blowoff in risk asset prices.