For the most part, over the last few months the market has been writing the same story it has been all year. The US Dollar is still King and risk assets have continued to struggle while it has remained strong. Energy is still the strongest sector and interest rates are still on the rise. However, alongside these overarching themes, there have been a few emerging trends that appear to be signaling the tides may be shifting.
Sector trends, most notably Financials, Healthcare, and Industrials, have been improving. Investor sentiment remains at historic lows, yet Consumer Discretionary stocks have begun to show relative strength against Consumer Staples, which have historically been more defensive assets.
Although the S&P 500 fell below its June low, more individual stocks remained higher than their June lows, making the downside move weaker for those positioned in stronger stocks. Lastly, and more importantly, credit spreads have been tightening over the last four months. It’s difficult to believe the market is on the brink of disaster when there has been no stress in credit.
The market isn’t out of the woods yet. Most major indexes are still caught below overhead supply and stocks making new highs are still nowhere to be found. Things are simply slightly better than they were a few months ago. There are pockets of strength forming and if the US Dollar can finally stop going up, we may be reading a different story into the end of the year.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. The content is developed from sources believed to be providing accurate information.