Rotation Among Asset Classes and Sectors

By Scott Poore, AIF, AWMA, APMA
Chief Investment Officer, Eudaimonia Group

There was a shift in the leading sectors and asset classes last week as tech and AI-related names under-performed.  Small and Mid-cap stocks out-paced Large Cap stocks last week and all sectors were higher, except for Tech, Consumer Cyclical, and Communication Services.  This kind of rotation is typically healthy for bull market cycles.  In fact, analysis done by noted hedge fund manager, Ray Dalio, suggests the US equity market is not close to a "bubble" just yet.  The Mag 7 stocks are seeing some softening as top executives have been taking profits in the elevated stocks.  

On the economic front, Consumer Credit came in much stronger than anticipated for January, showing the consumer is still spending.  One reason for the strong consumer is the healthy job market.  The Jobs Report last week showed that 275,000 jobs were added and Jobless Claims were as expected.  In fact, though the Unemployment Rate did tick higher to 3.9%, it is still below the historical average of 5.7%.  Inflation data is on deck this week in the form of CPI & PPI releases.  If the February numbers come in higher or lower than expected, it could make for uneven trading this week.  It has been at least 10 weeks since we have seen a 5-day decline of more than 1% on the S&P 500.  A pullback at this point would certainly be expected.

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