Ashraf Laidi looks at the sectors that will outperform as the elusive “R” value continues.
Epidemiologists are seeking to determine the R value – the effective reproduction number at which a virus spreads. Economists are looking to estimate the depth and length of the current recession and equity strategists are racing to ride the latest rotation in sectors.
Monday, U.S. stocks posted their biggest gain since early April on a combination of improved prospects of an effective vaccine from U.S. biotech player Moderna Inc. (MRNA). That's the fundamental explanation. What about the technical/quantitative explanation?
From year-to-date to 5 days-to-date
Year-to-date, technology is the only sector in the green, followed by the Health Care Select SPDR ETF (XLV) and the Consumer Discretionary SPDR ETF (XLY) barely in the red. The worst sector remains energy. The situation of the past five trading days, however, appears starkly different. Economically sensitive sectors such as the Materials Select Sector SPDR Fund (XLB) and Industrial Select Sector SPDR Fund (XLI) are in the lead along with energy, while defensive sectors such as healthcare and the Consumer Staples Select Sector SPDR Fund (XLP). The untouchable Technology Select Sector SPDR Fund (XLK) is the eight worst performing sector out of the major 11 sectors, reflecting the pause in technology, to give way for XLB, XLI.
How long can we rely on Fed Funds futures signaling negative rates by year-end to help indices?
You can see Ashraf’s daily analysis at www.AshrafLaidi.com and sign up for the Premium Insights. Ashraf discussed Trends in Yield Differentials at the TradersEXPO New York on March 8.
