The S&P 500 set a record Friday on lingering expectations of a Fed rate cut. Other major benchmarks also hit their own all-time highs. But a revealing breakdown of the broader index shows only three S&P 500 sectors set new highwater marks. That makes it a thin win for the stock market. It also indicates equities had to stretch to set this week’s record.
When the rate cut euphoria wears off, the stock market may settle into a channel that’s justified by the underlying economy’s fundamentals. Crescat Capital global macro analyst Otavio Costa pointed out Saturday that technical indicators presage a recession. Or at least a “soft landing” ahead:
S&P 500 at record levels but only 3 sectors are at all-time highs.
% of sector leadership now faltering as much as it did ahead of the last two recessions.
Why is this not another 2015 soft landing?
Back then, 20% of the yield curve was inverted.
Now it’s close to 60%! pic.twitter.com/cYeaKy25f9
— Otavio (Tavi) Costa (@TaviCosta) July 13, 2019
Looking at the yield curve, the picture isn’t so rosy either. At Forbes, Moola Chief Investment Officer Simon Moore explains how bond yields point to recession any way you read them.
Newton Advisors technical analyst Mark Newton told CNBC last week he expects to see the S&P 500’s historic climb run out of steam at 3,070. After that he expects the market to trade sideways. He advises investors to range trade at attractive entry points for stocks in companies with long-term theses you believe in. Keep your powder dry.
Here’s the sector breakdown for the S&P 500 index’s winning week:
The Three S&P 500 Sectors at All-Time Highs
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