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As a strange set of sectors leads the market, some suggest that investors ‘ride that dissonance’

  • Information technology, utilities and consumer staples have all been market leaders this year despite the sectors' fundamental differences.
  • Some strategists say this curious difference in market leadership is a good thing.

A strange set of sectors has been leading the markets lately.

Information technology, utilities and consumer staples led the way in May. To Max Wolff, market strategist at 55 Institutional, this combination of sectors suggests a "tug of war"

"You either totally believe and you think growth is coming, and you want to get the high multiple, high risk, high return growth names ... or you're really nervous, you think you're way out over your skis and you want to hunker down and have consumer nondiscretionary and utilities. It really speaks to a market and half the people are pushing one way, and half the people are pushing the other," Wolff said Wednesday on CNBC's "Trading Nation."

"Tech is really overpriced, but at least it delivers growth, and that's why people are crowding in there. It's also a place where the United States is globally peerless. And then on utilities and defensives, I understand that too because things have gone on longer than they should have and there's a lot to be nervous about," he said. "If you can ride that dissonance, it kind of makes sense as a portfolio."

Ari Wald, head of technical analysis at Oppenheimer, sees things a bit differently.

For the high-yielding utilities and staples, "one of the key factors has been interest rates. And I think more recently, with interest rates turning lower, you've seen the sectors that act as bond proxies like utilities, like consumer staples as well, become leadership while the flip side of that trade, financials, have really been under pressure," Wald said Wednesday on "Trading Nation."

Meanwhile "throughout these market rotations, whether it's risk-on, risk-off, rates up, rates down, commodities up, commodities down ... technology has really been the resilient sector that's been able to outperform throughout all these market environments," he added.

Going forward, Wald suggested that investors look specifically to cyclical growth stocks.

"Russell growth — tech-heavy — versus the Russell value, you can see Russell growth breaking out to the upside. This is the theme we think long-term investors should be keen on," he said.

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Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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