Market Momentum Shifts: Tech Takes a Backseat
The bull market’s driving force has traditionally been Big Tech, but this October, it’s got some unexpected company. Despite the major indexes being narrowly in the green, third-quarter earnings from Bank of America and Goldman Sachs have given the market a significant boost. But what’s more remarkable is the simultaneous rally of three other sectors – consumer discretionary, industrials, and financials – which have outperformed the S&P 500 since the August 5th low.
A New Era of Sector Rotation
This phenomenon is not unprecedented, but it’s a welcome change from the “Magnificent Seven” era, where tech dominated the market. Today, money is flowing into other sectors, a process that’s as old as public markets themselves. As Ralph Acampora, the godfather of technical analysis, once said, “Sector rotation is the lifeblood of a bull market.”
Tech’s New Companions
Jay Woods, an executive NYSE floor governor and chief global strategist at Freedom Capital Markets, recently shared his insights on Stocks In Translation. According to Woods, money isn’t leaving the market; it’s simply rotating from one sector to the next. He highlighted the strength in software stocks, particularly cybersecurity plays like CrowdStrike and Cisco, which have made a remarkable comeback.
The Rise of Legacy Tech
Cisco, once a damaged stock, has now returned to its dot-com bubble highs. Woods reflected on its round-trip journey, saying, “I hate that I like Cisco right now. I liked it in ’99, and it’s right where it was trading in 1999. That’s amazing.” IBM, another legacy tech giant, has also risen from the ashes to fresh records.
Beyond Tech: Hidden Gems Emerge
While Nvidia still leads the pack, over 20 stocks in the S&P 500 have outperformed it since the August 5th low. Electric power company Vistra Corp. and United Airlines have seen gains of 85% and 70%, respectively. These stocks were once laggards, but they’re now catching up. Even among the overextended, there are still potential winners to be found, such as utilities, which have formed a nice rounded base and broken out.
Tune In for More Insights
For more expert analysis and market insights, tune in to Yahoo Finance’s podcast Stocks in Translation, where editor Jared Blikre cuts through the noise to bring you essential conversations and critical context to make informed decisions for your portfolio.
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