Sector Strength: Consumer Discretionary Bottoming, Financials Still in Downtrend

Below we have updated our charts of sector relative strength. In each chart, rising lines indicate periods where the sector is outperforming the S&P 500. Charts with red shading indicate that the sector has underperformed over the last year. Finally, in each chart we have also included red dots that highlight each of the Fed rate cuts since August.

As shown, the Consumer Discretionary sector is in an attractive bottoming process while its more defensive counterpart, Consumer Staples, has recently been faltering after outperforming since October. While Consumer Discretionary stocks are showing signs of a bottom, Financials remain in their downtrend.

The market continues to show conflicting signals as to where the economy is going. While a recession seems to be a foregone conclusion at this point, the so-called defensive sectors such as Health Care, Telecom Services and Utilities have been weak. At the same time, economically sensitive sectors like Energy, Industrials and Materials have been market leaders.

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