Well, that sure was a dramatic week! But now that we have the final score from last week’s rollercoaster of trading, a proper assessment can be made.
One thing’s for sure - there’s been a total shift in sentiment over the past few weeks. We’re no longer in the feel-good, euphoric environment of mid-July. Now, the trading community’s focus has shifted, completely, from inflation to recession.
But as I’ll show you in the updated performance rankings, I think some of that attention may be misplaced. Here’s what I mean…
Industrials Emerge as One-Week Leader
I’m finally able to report something bullish for stocks in the near-term. Seeing industrials (XLI) emerge as the top-performing sector last week. This isn’t usually a sector that does well if things are about to head south.
While industrial outperformance in the near-term may stave off recessionary concerns, it does reopen the door for inflationary pressures. This is not totally unexpected given the Fed’s about to turn on the money printer again in September.
The “inflation trade” includes sectors like energy, industrials, basic materials, and sometimes even consumer staples.
Energy and basic materials have notably lagged the market year-to-date, but if anything, they may be on-sale right now. It’s something I’m monitoring closely, but in the immediate-term, I need to see technology start catching a serious bid again for us to go back into “risk-on” mode.
Tread carefully out there,