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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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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