The sectors dominated by Big Tech (information technology and consumer discretionary) have had a roaring comeback. But over the full peak-trough-new peak journey, it is the defensive sectors (utilities, staples, healthcare) that have outperformed s…  | By atans1 on 20/08/2024 |  The sectors dominated by Big Tech (information technology and consumer discretionary) have had a roaring comeback. But over the full peak-trough-new peak journey, it is the defensive sectors (utilities, staples, healthcare) that have outperformed significantly. Appetite for equity risk is back, but there is a small pinch of caution embedded in it. Another point, made to me by Kevin Gordon of Charles Schwab, is that the economically sensitive sectors, such as financial and industrials, have also outperformed tech. This is an odd fit with the notion that the whole incident was a recession scare. The possibility that what happened was the partial unwinding of an overcrowded overvalued trade probably deserves more emphasis (even though the trade might still be overcrowded and overvalued). Yin Luo of Wolfe research emailed me to say that "yes, it's a risk rally, but it's quite different from typical risk-on events". He notes that two types of stocks, those with a lot of price momentum and with positive revisions to analysts' earnings expectations, were both up strongly. These "factors" are often a proxy for financial quality, and high-quality names usually underperform in a mad rush to add risk. Again, there is a whiff — though just a small one — of caution in the air. Unhedged: FT newsletter Related post: S&P 500 & NASDAQ turn positive for the month after recovery from early August sell-off | | | |  | You can also reply to this email to leave a comment. | | | | |
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