… the one-eyed man is crowned king.
The above chart shows you the sectors that are driving the market upwards at the moment. Listed in the legend are the top-10, what I would call the one-eyed men of the current market.
Among them are found such ‘beautiful’ sectors as healthcare, food stocks or insurance companies. Less than two weeks ago, this list was still heavily studded with oil & gas juggernauts, such as Chevron (CVX) or Schlumberger, which are now starting to finally pull back after weeks and months of lacklustre action, and energy is starting to slide off.
When I say ‘beautiful’, I am of course speaking in irony. The basket of stocks leading this current rally is chock-full of names that are pointing towards institutional money hiding in risk-off equities due to hawkish monetary policy, and by now the market has equally been discounting a recessionary economic environment from the effects of that monetary policy. The same can be observed in debt securities.
This hasn’t just started yesterday, in fact it has been going on for months now. Don’t get fooled though – the market will always discount far ahead what its participants believe is most likely to happen in the near future, often 6-12 months ahead or more.
This is normal, and to be expected. The important part here is to understand that this discounting effect is universal – when the night it darkest, suddenly the market will spark to live again … and people will disbelieve it.
But one thing is for sure – when the market turns for good, it will certainly not be led by the likes of Campbell Soup (CPB), Humana (HUM) or Cardinal Health (CAH).
When exactly that will be, no one knows. It could be starting in two weeks, or in a year or later – and only the emergence of powerful new leaders from the noise will tell us when that time has come.
So hold tight.
