The markets are on a nice run, but drilling down a little shows continued nerves.
Last night’s letter from BTIG’s Mike O’Rourke makes a good observation:
In today’s trading, Treasuries finally down-ticked enough to drive the 10 year yield above 3%. That being said, the yield’s close proximity to 3% is a sign that despite the equity rally, there is still a cautious tone in the financial markets. We believe we may be witnessing early signs that investors are willing to increase their exposure to risk, notably equities, but in a defensive manner. Most sectors are posting a strong performance in July as one might expect with the S&P 500’s big rally. What has caught our attention are the Utility, Telecom and Consumer Staples sectors. The Utility sector is up 10.4% this month and on track for its best monthly performance since March 2002. The Telecom sector is up a less impressive 8.7% on track for its best monthly performance since May 2007. Consumer Staples are up 7.4%. Although they are mildly underperforming the S&P 500 this month, they outperformed the S&P 500 by 259 and 346 basis points, respectively, the previous 2 months. The kicker is that Consumer Staples are on track for their best monthly performance since October of 2000.
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