December 13, 2021, 4:00 pm EST
Feeling Defensive At the Record High
S&P 500 made a record high last Friday (12/10) but stock markets behaved very bearishly or were defensive today with DJIA -320 points or -0.9%, S&P -0.9%, Nasdaq -1.4%.
When checking out the sector bar chart as shown in the featured picture, we can easily see only defensive sectors are up: healthcare, utility, REIT, and consumer staples. Looking into more details, we can highlight the following points where bulls were exhausted and bears are rising:
- Semiconductors: NVDA -7%, AMD -3%
- Automobiles: TSLA -5%, GM -6%
- Airlines & Cruises: UAL -5%, NCLH -4%
- MEME: GME -14%, AMC -15%
- Cryptocurrencies: Bitcoin -8%, Ethereum -10%
At the same time, there were many breaking out and 52-week highs from the defensive areas:
- Utility: NEE, AWK
- Healthcare: DGX
- REIT: PSA, EXR
- Consumer Staples: CHD, MKC, HRL, KR
The change of leadership should be self-explanatory. The reasons behind this transition are
- Record High Debt Level
- Near 40 Year High Inflation (CPI)
- Rising Rates from the Fed
- Troublesome COVID-19 Resurgences
- Unstable China Economic Condition
Investors or traders feel unsafe to put money in these markets so there is a strong outflow from risky assets into conservative asset classes mentioned above. There are no apparent triggering events to make the sell-off today but market participants made a quick adjustment on their portfolio to prepare for it.
