March 29, 2021, 11:32 am EDT
Food, Utility, and REIT
Food and utility (electricity, natural gas, water) are the most important elements that everyone needs. REIT (housing, apartment, commercial fixed income, or dividend) is also a reliable source of cash flow during all economic cycles. It is unusual to see all these defensive types of stocks began to rally when Dow Jones and S&P 500 made new historical highs in the trading session last Friday (03/26).
For example, check out these stocks, KHC, SFM, K, KR, SJM, CPB, HRL, we noticed they made straight-up rally since early March. At the same time, utility (ETF: XLU) and REIT (ETF: XLRE) also participated in the rally altogether. What does it mean to investors’ minds?
It means “Defense”.
The other observation point is from the technology-focus index Nasdaq. Nasdaq made a historical high on 02/16 at near 14200. But, it kept going downward spiral to around 13000 as of now. Its leadership is gone to these defensive sectors.
In summary, sector rotation is a sign of bias change from market participants. Currently, once shining names like TSLA, AMZN, AAPL, ZM lost their attraction. Consumer staples, utility, and REIT quietly took over their leadership spots. It should give us important hints on how should we adjust our portfolio composition.