- Software stocks have outperformed semiconductors over the past three months, reversing the longer-term trend.
- Large-cap stocks continue to dominate, while Canadian consumer staples and discretionary stocks are gaining momentum.
- A renewed signal from a market early-warning indicator suggests investors should reassess their exposure to risk.
A shift in market leadership is emerging as software stocks gain ground against semiconductors, while defensive sectors show signs of renewed strength.
In the October 21 edition of Markets in Motion, Bruce Campbell of StoneCastle Investment Management examines changing sector performance across Canada and the United States, highlighting potential opportunities and warning signs for investors.
Although semiconductors have significantly outperformed software stocks year to date, that relationship has reversed over the past three months. Campbell’s relative rotation analysis shows software moving into the leading quadrant while semiconductors approach lagging territory.
This article is being disseminated on behalf of StoneCastle Investment Management, a third-party issuer, and is intended for informational purposes only.
Large-cap stocks continue to outperform smaller companies, reinforcing the narrow market leadership seen throughout the year. Energy remains strong in both markets, while Canadian technology and US healthcare are also showing relative strength.
However, Campbell is paying particular attention to consumer staples and discretionary stocks, which are beginning to improve in Canada.
That shift coincides with another signal from StoneCastle’s early-warning indicator, which has triggered only a handful of times in recent years.
Campbell stops short of predicting a downturn but suggests investors consider reviewing their portfolios and preparing for potential volatility.
Watch the full video above to explore the sector rotations and market signals shaping the outlook.