Market leadership is changing

“Prior to this fall, whenever the market bounced, it would be led by growth and by the highest-beta names that sold off hard earlier this year,” says Matt Orton, CFA, Chief Market Strategist at Raymond James Investment Management. “What we’re seeing now is that high-beta and growth names are lagging as the market moves higher.”

Instead, more defensive names are leading the market.

“You’re seeing cyclicals move,” he says. “You’re seeing financials, industrials, and healthcare not only outperform on the way down and provide protection, but they’re leading on the way up as well. You’re actually seeing value and quality as factors leading the market higher. It’s very rare to see both of those working together. The last time we saw that was after the Tech Bubble, and it persisted for quite a long time. If we have that sort of change in leadership like we saw in the early 2000s, this rotation in leadership for the market could have legs to it.”