There is a sense the market is becoming more defensive. Another way to look at is what’s occurring is the offense is looking at new areas.
It’s not that Technology and Communication Services are outcast, but investors are in search of new areas for bigger returns.
The winners on Friday underscore this shift, which has been very stealthy, but is now becoming more pronounced. I’m referring to the commodities super cycle, which seems focused on oil, crops and industrial metals.
These areas outpaced gains in several S&P 500 sectors:
S&P 500 Index
Communication Services XLC
Consumer Discretionary XLY
Consumer Staples XLP
Health Care XLV
Real Estate XLRE
We are adding to Industrials this morning and are now fully vested.
The yield curve continues to surge, and I suspect its creating a more cautious environment for stocks.
Meanwhile, the move in commodities still has a long way to go from here.