Jaws 2
Issue 74
The jaws continue to bite as the leading tech stocks suffer.
Rotation into defensive themes.
Financials and Energy provide sanctuary.
“Global Trends tracks where global momentum is flowing — across countries, sectors, and stocks — giving investors the opportunity to act before the crowd.”
The World Index drops to a ByteTrend Score of 4 in USD. The price is just below the 30-day moving average.
World Index – Developed Markets – Daily
Global Equity Breadth – CAPR
Although price breadth remains healthy, CAPR breadth continues to thin. That said, the neutral zone has widened as the bear trends fade.
Now that the AI trade is in correction mode, the leadership is even narrower. In this week’s stocks section, we highlight leading banks, some software, oil refining amid the Iran war’s reignition, and some REITs.
Net Winners
The winners-less-losers metric guides asset allocators. The banks are back with force, boosting their established leadership. This week also saw renewed vigour in energy stocks as the war in Iran resumed.
Sector Average Trend Score CAPR
The other sector worth mentioning is Real Estate, where the recovery is real. Healthcare is also an emerging contender, but these are still early days. What is clear is that, among the traditional defensive sectors, these have been the first to respond to the closing jaws; i.e. as tech hardware slides back, these sectors benefit.
Trend Type Performance in CAPR
As the performance jaws close, it means the weakest stocks are less likely to fall in CAPR terms. The chip stocks are worth trillions, so a little easing in them is well received across the rest of the market. There are even some new uptrends, mainly from Financials and Energy.
As you can see below, the jaws are closing. The emerging vs weakening trends (green vs orange) have already closed, but the leaders vs bear trends ( blue vs red) are just getting started. This last happened on such a scale in March 2000 and in November 2007.
Regions and Industries Average Relative Score
This table (below) shows the average CAPR score for each global industry, by region and in total.
Tech Hardware continued to weaken, as fears about valuation, concentration, and spending ran into Korean margin calls and China’s impressive Moonshot / Kimi model releases. Tech Hardware dominates the index, so as it falls, all other sectors see strength relative to the index, on top of the fact that capital flowing out of tech goes back into other areas, boosting them.
Banking & Lending continued to recover, as large US banks reported strong results due to large fundraising activity, such as the SpaceX IPO. Energy Producers bounced as the Hormuz crisis heats up again. Transport & Logistics stocks picked up, especially in the US, and at the bottom of the table, Home & Lifestyle (luxury) bounced a little as the AI boom creates more millionaires and jewellery, in particular, sees strong demand.
In the Americas, Property & REITs continue their impressive run, and Investment & Advisory stocks are picking up too. In Europe, it’s the banks leading the way, and in Asia, Construction & Engineering and Advanced Industrials are fading fast - a red flag for the economy there.
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