- US technology and energy stocks are losing relative momentum as financials, industrials and consumer sectors improve.
- Small- and mid-cap stocks are strengthening while large- and mega-cap companies move towards lagging territory.
- Canadian markets are showing similar rotation, although technology remains comparatively strong on the TSX.
Market leadership is broadening beyond the biggest companies, with smaller stocks gaining ground as technology and energy lose relative momentum.
In the November 12 edition of Markets in Motion, Bruce Campbell of StoneCastle Investment Management examines shifting sector performance across US and Canadian equities, highlighting improving opportunities outside traditional market leaders.
In the US, technology is approaching the lagging quadrant, while energy is moving towards weakening. Financials are nearing the leading quadrant, with consumer discretionary, consumer staples, utilities and industrials also showing improving relative strength.
This article is being disseminated on behalf of StoneCastle Investment Management, a third-party issuer, and is intended for informational purposes only.
The rotation extends to investment styles and company size. Growth stocks are weakening relative to value, while large- and mega-cap companies are losing momentum. Small- and mid-cap stocks, meanwhile, are showing stronger relative performance.
Canada presents a slightly different picture. Technology remains in the leading quadrant on the TSX, although energy and materials have weakened. Financials, healthcare, industrials, utilities and consumer sectors are showing improvement.
Campbell also examines historical Russell 2000 performance during US midterm election years, using data from MoneyFlows. The chart suggests that periods of weakness between May and October have historically been followed by stronger returns.
While historical patterns do not guarantee future performance, the improving momentum among smaller companies suggests investors may be seeing a broader range of market opportunities.
Watch the full episode above for Campbell’s latest analysis of sector rotation, market capitalization and emerging trends across North American equities.
