Positive momentum has continued to shine as a forward indicator for technology and consumer discretionary stocks in recent months. Both sectors remain the sector leaders in the US, based on a set of exchange traded funds through yesterday’s close (Aug. 12). Meanwhile, the lagging sectors show few signs that a turnaround is imminent.
Technology Sector SPDR (NYSE:XLK) is holding on to the top year-to-date performance by a wide margin. The fund is up 25.3% so far in 2020. Yesterday’s rally left the ETF just 1.3% below its previous record close, set on Aug. 6.
Tech’s ongoing strength is starting to inspire looking to other corners of the market for leadership in the months ahead.
“Cyclicals are catching investor interest again,” advises Nicholas Colas at Data
Trek Research.
“As the US economy heals, these offer the possibility of considerable operating leverage and therefore earnings surprises. Second, investors figured out tech and health care fundamentals are great but where can they really go from here?”
XLK Daily Chart