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The new year continues to bring changes to the investment markets as, this past week, we witnessed yet another leadership rotation.



Weekly Market Overview

January 22, 2018
By Peter Sorrentino, Chief Investment Officer

The new year continues to bring changes to the investment markets as, this past week, we witnessed yet another leadership rotation. Unlike last year where technology would occasionally yield to industrials only to reassert its command of the markets, this year, energy and industrials led in the open weeks then handed the baton to health care and, of all groups, consumer staples. This represents a significant change, not only in that this sector managed to make it through all of 2017 without ever exhibiting this sort of strength, but the way in which it did so last week. Recall that in June of last year, Amazon announced it was acquiring Whole Foods. This news sent grocery retailers into a price decline for the balance of the third quarter. In a classic move worthy of the Chinese strategist Sun Tzu, word reached the markets that grocery retailer Kroger was looking at acquiring Overstock.com. This would not be as far afield as it might appear, recalling that Kroger previously acquired Fred Meyer, making Kroger one of the nation’s largest jewelry and furniture retailers. The prospects of an industry consolidation wave driven by mergers and acquisitions boosted the lagging consumer staples sector 2.47% last week, a second place standing behind the 2.65% gain posted by health care issues. Utility shares continued to surrender value, losing another 1.11%. Domestic markets were broadly higher, as were both developed and emerging markets, which added 1.24% and 2.02%, respectively. One remarkable aspect of the current rally is the fact that it is in the face of rising long-term interest rates. Without much fanfare, the ten-year U.S. Treasury yield closed the week with a 2.659% yield, eclipsing last year’s high of 2.626%. The prospect of a government shutdown had little impact on markets in general, as investors focused in on earnings reporting season and the outlook for business in 2018.

 

Source: All statistics herein obtained from Bloomberg.

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