In this brief market report, we look at the various asset classes, sectors, equity categories, ETFs, and stocks that moved the market higher and those that moved lower. The idea is to identify newly emerging market leadership.
Identifying the pockets of strength and weakness allows us to see the direction of significant money flows and their origin.
The 9 day winning streak has ended.
After a rare 9-day winning streak, the S&P 500 tread water last week and finished down slightly.
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A look at monthly returns.
This chart shows the monthly returns for the past year. May is off to a good start as investors were cheered by the trade deal framework with the UK and signs of thawing in the frigid relationship between the US and China.
So far this year, only January has been an up month. This May, we may get another winning month but it's far from certain at this early point.
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A look at drawdowns this year.
Here is a closer look at the pullbacks we've had over the last 12 months, using a drawdown chart. The current drawdown is -8% from the February 19 high. As you can see, most of the damage over the last 12 months has happened since the start of this year.
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A look at the bull run since it began last October.
This chart highlights the 53.2% gain in the S&P 500 from the October 2022 low through Friday's close. We are still well below the long-term trendline and it looks to me like we may have a few more bouts of selling before this correction is over.
Major asset class performance.
I'm trying out a new set of charts this week, and if you have an opinion, email me at erik@zeninvestor.org.
Here is a look at the performance of the major asset classes, sorted by YTTD returns. The best performer so far is Non-US equities, The worst performer is US equities.
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Major Indices performance
2025 is shaping up to be the year of non-US markets, both developed and emerging. Everything else is down for the year, especially US Small Caps.
Non-US market returns
This chart shows how dominant non-US markets have been so far this year. Germany leads the Developed Markets while India is down but less than the US.
Equity sector performance
On a year-to-date basis, Utilities are leading the way higher, based on heavy demand from server farms running AI models. Consumer Discretionary is the worst performing sector. Is consumer spending going to start shrinking too?
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Equity Factor Performance
This chart shows the YTD performance of equity groups that share similar characteristics, like Quality, Value, Low Volatility and so on. We can see that companies with steadily growing dividends (Yield) have been the best performers, while Small Caps are getting hammered.
Growth vs. Value
In this chart we can see the repeating pattern of non-US stocks outperforming US stocks, and Small Caps struggling to keep up. Overall, Value has outperformed Growth on a year-to-date basis. This may be because investors and consumers are dealing with high anxiety over tariffs and how much they could cost them in the near future.
Commodities
Gold and Silver are the places to be, if you invest in commodities. Oil and Natural Gas have seen heavy selling.
The S&P Mag 7
Here is a closer look at the Mag 7. These seven stocks are still down on a YTD basis. Faith in the AI trade is being tested.
The big winner this week was Tesla (TSLA), which has suffered serious damage to the brand and Elon Musk's reputation. Tesla, Apple, and Google are all in there own bear markets.
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The Mag 7 dominance is a drag on performance this year.
After leading the market higher for the last two years, the Mag 7 are now a drag on the S&P 500 index on a year-to-date basis. The other 493 stocks in the S&P 500 are up an average of 0.9% YTD.
Investors are cutting back on the Mag 7 stocks and looking for other potential AI winners that are trading at much better prices.
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The 10 best performing ETFs from last week
The big winners this week are Solar Energy, Gold Miners and 3D Printing. Bitcoin made it back above $100,000 after a sharp correction the past couple of months.
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The 10 worst performing ETFs from last week
After making the top 10 list for two weeks in a row, Cannabis is back on the loser list, down 13% last week alone. Biotech also got hit hard, probably due to fears that China will impose heavy tariffs on the drugs they sell to America.
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Momentum Stocks
Hertz (HTZ) has rocketed higher this year but it started from a very low base. Investors want bargains right now, so Hertz was a good value play. Compass Minerals (CMP) produces salt and potash.
Final thoughts
Notwithstanding the nine day, 10% rally in the S&P 500 index, we are still stuck in a correction. I expect another leg down or two in the weeks ahead, and perhaps a test of the recent low of 4982. I think that level will hold, though, and a bear market will be avoided. If trade negotiations go poorly, we could slip into a tariff-driven recession, which would change my outlook from cautiously bullish to outright bearish.
To recap the 2025 YTD action, investors have been...
- Selling US stocks and buying Non-US
- Selling Energy stocks and buying Gold & Silver
- Selling Semiconductors and buying Utilities
- Selling Growth and buying Value.
- Selling Cyclical stocks and buying Defensive names
- Selling the Mag 7 (down 12% YTD) after two years of heavy buying