Sector Relative Strength: Energy, Materials Risk Breaking Uptrends

After a week like last week, it's often a good idea to look at how the different sectors of the market stack up against each other. Below we have updated our charts highlighting sector relative strength over the last year. In each chart, rising lines indicate periods where the sector is outperforming the S&P 500, while red shaded charts indicate that the sector has underperformed over the last year. Finally, in each chart we have also included red dots that indicate each of the Fed rate cuts since August.

Over the last year, four of the ten sectors are currently underperforming the S&P 500. While it comes as little surprise that the Consumer Discretionary and Financial sectors have lagged the market, defensive sectors such as Healthcare and Telecom Services are also underperforming, which is puzzling given the current economic backdrop.

Following last week's sell off in commodities, the Energy and Materials sectors are approaching key support levels. If these trends do not hold, the multi-year uptrend in both sectors will be at risk.

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