Winners keep winning and the losers keep losing. That sums up a fair amount of market action lately, albeit with some exceptions. Let’s run through some of the highlights for an update on how trend behavior is evolving.
For context, start with US stocks (VTI), which continue to show a mild downside bias (all charts, by the way, reflect weekly time frames). The resilience of the labor market is a factor that’s probably providing support and offsetting some of the blowback from the Ukraine war, inflation and rising interest rates. While it’s impossible to prove a counterfactual, I’ll bet a buck that US stocks would be a lot lower (and the trend would looks far more uglier) if the labor market was showing signs of buckling.
For US bonds, by contrast, there’s (still) no mercy. The iShares 7-10 Year Treasury Bond ETF (IEF), for example, continues to sink and it’s not obvious that the selling is about to subside.
Meanwhile, recent winners continue to show solid upside momentum — broadly defined commoditie (GCC) are one example.
Within the commodities space, agriculture remains especially hot.
For US equities, the consumer staples sector (XLP) still look strong.
Energy shares also continue show a strong uptrend.
By contrast, renewable/green energy (ICLN) still can’t shake off the recent weakness that’s weighed on the sector lately.
Meanwhile, big-cap healthcare (XLV) still looks strong.
Ditto for the utilities sector (XLU).
Real estate investment trusts (VNQ), however, are still sitting on the fence. Are they poised for an upside breakout? VNQ seems to be leaning in that direction, perhaps partly because (as some analysts predict) the rise in interest rates is close to peaking, at least for now. In turn, this view relies on the forecast that the recent surge in inflation is peaking. If true, that’s good news for the yield-sensitive REITs space.
Property shares outside the US (from a US-based investment perspective) are another story. The strong US dollar continues to create headwinds here and so it’s no surprise that the trend still looks bearish for VNQI.
The trend is your friend… until it isn’t. On that note, shares in Latin America (ILF) seem to be running into trouble lately after an impressive run previously for much of the year to date. Has this rally run out of road? Let’s see what the next couple of weeks reveal before answering.
Finally, in the country-fund corner, Indonesia (IDX) continues to run higher. This is a relatively slow-but-steady rally, but perhaps that’s a reason to think it’s set for an extended run. ■