The Current State of Stock Rotation: Which Sectors are Hot?

Here’s another sign that the U.S. stock is resuming some normal historic patterns. In normal times, there are rolling bear markets and bull markets within the sectors of the indexes. Some sectors are doing well while others are doing poorly, regardless of what the market indexes are doing. That’s happened since 2014, when the Fed ended quantitative easing. Before that, almost all stocks rose with the Fed’s stimulus. This article points out that the sectors that were beating the indexes now are starting to fade while the sectors that lagged the indexes are doing better.

No longer are low-volatility stocks the leaders. Nor are utilities, or companies that sell toothpaste and handsoap. Nary a defensive share is rallying as leadership in the S&P 500 Index switches from the dividend-paying bond surrogates that ruled 2015 to technology, banks and commodity firms that benefit from an expanding economy.

One interpretation is that the rotation was inevitable. Another is that the shifting tides are the start of something big…