Even With Stocks Rallying, Here's How You Know Investors Are Still Pretty Nervous

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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Photo: StockCharts.com

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