As we come to the end of October, the bull market continues to rage on. While technology remains the focus of the media, it has taken the backseat to consumer discretionary, financials, materials and metals with recent performance. This consistent rotation is the lifeblood of a bull market. Even when looking at equally weighted sectors, the leaders continue to break out to new highs on both an absolute and relative basis. Through all of this, there hasn’t been any real momentum into historically defensive sectors, highlighted by consumer staples making another new 52-week low last week.
Speaking of new lows, they are still nowhere to be found amongst US equities. Across all market caps and in all time frames, the list of stocks making new lows has all but disappeared. Nothing can take the air out of this market until that changes. One of the most interesting parts of this latest move in equities is that the dollar is rallying alongside it. When a strong negative correlation no longer acts as a headwind, we take notice. In the strongest bull markets, volatility slowly dissipates while correlations move closer and closer to 0 from both directions.
Lastly, credit spreads continue to show that there is no stress in credit despite the strong surge in the dollar and gold. All of these headwinds being easily cast aside by the equity market is a signal of incredible resilience. These are the trends that must be followed, not fought against. We plan to continue to capitalize on this move, using the falling correlations to our advantage when selecting stocks outperforming both their peers and the US indices.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. The content is developed from sources believed to be providing accurate information.