When money is coming out of one sector and going into another one, we call that sector rotation. It’s a classic characteristic of a bull market, or for that matter, a market where we are generally being rewarded for owning stocks, not for selling them.

Let’s go back to February. At that point, we were seeing laggards dragging the market lower. Things like Financials and Materials were making new relative lows and had already begun their declines. In fact, both of these sectors peaked in December, months before the overall market peaked. That’s part of why we got so bearish.

So anyone who tells you that this year’s crash “came out of nowhere”, is really just fooling themselves. This year’s stock market crash came after more warning signs than any crash in U.S. history. I’ve said it before and I’ll stand by that.

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I had a great conversation yesterday with Todd Sohn of Strategas, and our very own Steve Strazza, about Sector Rotation. We talked about this rotation, in theory, and also discussed what the current environment is suggesting.

The video of that call will be up shortly on our Youtube Channel. Make sure you’re subscribed so you never miss an update! Subscribe for Free here.

The 3 of us were pretty much on the same page that we’re getting healthy rotation among sectors and this will likely lead to new all-time highs across the major US Indexes, Sectors and Market Caps. So I asked Todd, what would you tell the Doom & Gloomer out there who is watching/reading this saying to him/herself that we’re all completely full of it and the market is about to crash.

Right away he said, “Show them the Equal-weight Industrials breaking out to new highs relative to Equal-weight S&P500: [Read more…]

What’s the bear case for equities if Financials start to outperform for the first time in, what feels like, forever?

A funny thing happened this week. The Nasdaq, as well as some of the major Large-Cap US Indexes, were under pressure for a couple of days. But did you realize which which sector was the best performer during that selling?

Financials.

Wait, what? Relative strength in Financials?

Looking at this a little deeper, if Financials were ever going to start to outperform, this would be a perfectly logical place for that to start. In fact, this is exactly where they started to outperform after the Financial crisis: [Read more…]