Equity indices pulled back last week, with the S&P 500, Dow, Nasdaq and Russell 2000 returning -1.9%, +0.7%, -4.5% and
-3.0%, respectively. Sector rotation continued and intensified: Consumer Staples (+5.0%), Energy (+4.9%) and Health Care (+3.5%) gained while Technology declined 7.7% with investors reassessing AI capital intensity and data-center financing. The equal-weight S&P 500 gained 0.5%, further pointing to concentrated weakness in the market’s largest growth holdings. Yields eased late in the week despite hotter-than-expected inflation data, with the 10-year ending near 5.1% (-15bps WoW), while oil rose on Middle East concerns with NYMEX finishing the week >$100/bbl. This week’s earnings reports, particularly Meta (NASDAQ: META) and Tesla (NASDAQ: TSLA), will be an important test of AI-related capex expectations and equity valuations.
Following our report last week highlighting Sandisk’s move out of the Top 50 (NASDAQ: SNDK), we saw more semis sink. Marvell (NASDAQ: MRVL), Western Digital (NASDAQ: WDC), and KLA (NASDAQ: KLAC) were all down at least 15% last week. A caveat here, though, is at time of writing these three semiconductor names are up as much as 6% on the day. While SFO is not explicitly bearish on semis, we do anticipate rotations into sectors less dependent on an end-of-decade AI payoff. Not all are automatic winners, but names like Sherwin Williams (NYSE: SHW) and Procter & Gamble (NYSE: PG) have more concrete earnings stories and an established history of shareholder returns through multiple business cycles. SFO is looking toward cash generative category winners like SHW and PG to round out our index-linked portfolios in a higher yield, higher inflation environment. We reiterate our macro bullish views despite persistent inflation and higher yields on the most recent episode of The Nick Stenger Show linked here: Ep. 230 – Is the Government Lying About Inflation?.
Financial Advisor in Chicago, IL
Stenger Family Office - Chicago Financial Advisors
150 N. Riverside Plaza
Suite 1950
Chicago, IL 60606
(630) 912-8295
Other office locations:Naperville, IL | Houston, TX | Baton Rouge, LA