State Street’s Chart of the Week – Coronavirus: Cyclical sectors underperform whist technology stocks rally

Please see below the latest ‘Chart of the Week’ from State Street Global Markets


Coronavirus: Cyclical sectors underperform whilst technology stocks rally

Until Monday, stock markets were surprisingly resilient to concerns that the Coronavirus was disrupting supply chains, consumer spending, and future earnings; flirting with all-time highs at the end of last week. However, the technology sector is still leading performance this year despite lower sales and earnings estimates from certain blue-chip companies, and a number of semiconductor stocks. Despite relative calm on the surface, weak performance of cyclical sectors suggested cracks were beginning to appear.

A wave of sell-offs hit the markets on Monday following a surge in Coronavirus cases in Italy. But it was not Technology stocks that suffered most. Instead, cyclical sectors struggled, with Energy, Materials and Industrials being the weakest performing sectors this year as investors worry about the economic impact of the virus. Whilst this could be in response to analysts’ negative earnings revisions, media sentiment has also turned negative, suggesting that the cyclical underperformance  might be likely to last. This implies a more rational response to risks from the stock market than appears at first glance from the market levels.




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