Cyclical equity sectors outperforming

Materials could soon overtake tech as best performer since 2020

Chart of the Day

The cyclical sectors of the S&P 500 have been the outperformers over the past month, with financials, energy and materials all up by between 7% and 9%, compared to a rise in the overall S&P 500 of less than 2%. The outperformance of materials, linked to the strength of commodity prices, means it is now the second best performer since the start of 2020, and is threatening to overtake tech.

Macro

US industrial production rose by a relatively small 0.7% MoM in April, though base effects meant the YoY rate jumped.

US retail sales were unchanged in April. Across the categories, the moves ranged from a 5.1% MoM fall for apparel to a 3.0% increase for food and drinking place sales.

There is clear sign of inflationary pressure in the record low inventories-to-sales ratio. in the US.

Markets

Non-commercial traders increased their net short position in the USD again last week.

Traders have reduced their net position in the CHF, and are now short, even as the CHF has appreciated against the USD.

The Canadian dollar has been doing particularly well, though long positions are still lower than in late 2017.

Volatility dropped back at the end of last week.

The ratio of financials to the overall market is closing in on the pre-Covid level.

That reflects the increase in long rates in recent months, which was the case again last week.

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