We are on track for three winning months in a row. July is turning out to be nearly as strong as June was. How much higher can we go?
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 shifting trends and emerging market leadership.
Identifying the pockets of strength and weakness allows us to see the direction of significant money flows and their origin.
July is ending with a boom
July was already a reasonably good month, but last week it kicked into a higher gear. It logged 5 up days and 5 new highs in a row - a rarity in stock market history.
ZenInvestor.org
A look at monthly returns.
This chart shows the monthly returns for the past year. It brings into focus the powerful rally we have seen since the April bottom.
ZenInvestor.org
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 0.0% after closing at a record high last Friday. As you can see, all of the damage done in February through March (down 19%) has been repaired in June-July.
ZenInvestor.org
A look at the bull run since it began last October.
This chart highlights the 72.9% gain in the S&P 500 from the October 2022 low through Friday's close. We are now well above the long-term trendline and it looks to me like we may have a couple more weeks of upside before we fall into another correction.
Major asset class performance.
Here is a look at the performance of the major asset classes, sorted by last week's returns. The best performer was REIT and the worst performer was Commodities.
ZenInvestor.org
Major Indices performance
Last week we saw developed market stocks (excluding the US) lead the market higher. Emerging Markets gained, but not as much as the US market..
Non-US market returns
This chart shows last week's returns for non-US markets. They have been leading the US so far this year. Japan had a great week but India didn't move at all.
Equity sector performance
Healthcare finally caught a bid, as did most of the market sectors. Tech barely finished the week in the black, after a multi- month runup.
ZenInvestor.org
Equity Factor Performance
This chart shows the weekly performance of equity factors like Quality, Value, Low Volatility and so on. We can see that companies with strong earnings were in demand last week, while yield stocks cooled off.
Growth vs. Value
Non-US Value stocks were the place to be last week.
The S&P Mag 7
Here is a closer look at the Mag 7. These seven stocks are still lagging on a YTD basis. But faith in the AI trade appears to be coming back.
But the big winner last week was Alphabet (GOOGL), while Tesla (TSLA) took another beating.
ZenInvestor.org
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 5.9% YTD.
Investors are cutting back on the Mag 7 stocks and looking for other potential AI winners that are trading at better prices.
ZenInvestor.org
The 10 best performing ETFs from last week
The big winner last week was Cannabis. Oil Services and Equipment took the #2 and #3 spot.
ZenInvestor.org
The 10 worst performing ETFs from last week
Three of Cathy Wood's ARK funds made the list of worst performing ETFs last week. One notable ETF on this list is the VanEck Semiconductor (SMH). Does this mean that the AI trade might be slowing down?
ZenInvestor.org
Momentum Stocks
MP Materials (MP) is benefitting from the pivot away from China and back to the US for the mining of rare earth metals. Investors want bargains right now, and Hertz is a good value play.
Final thoughts
It was a very good week, following a very strong month. How much longer, and how much higher, can this rally take us? I'm a skeptic because valuations are so high, and tariffs are full of uncertainty. I also think the consumer is stretched, and is about to get hit with even higher prices. This could finally start to impact spending.
To recap the week's action, investors were...
- Selling commodities and buying REITs
- Selling India and buying Japan
- Selling Tech and buying Healthcare
- Selling Yield and buying Earnings
- Selling Growth and Buying Value
- Selling TSLA and buying GOOGL
- Selling Regional Banks and buying Cannabis