Market correlations are always interesting because they can reveal how investors are thinking.
One correlation recently been similar movement between semiconductors and industrials. (This chart shows the 10-day correlation between the Philadelphia Semiconductor Index and the
XLI
.)
This isn’t a huge surprise because both are relatively cyclical. Stronger GDP growth tends to favor industrial equipment. It also boosts demand for chips.
On the other hand, software companies have benefited from the coronavirus lockdown for two reasons. First, more social distancing means more demand for cloud computing and videoconferencing. Second, weaker economic growth keeps interest rates low, which makes it easier to own high-multiple software names like
ZM
or
CRM
.
Industrial stocks outperformed in mid-September before crashing along with the S&P 500 last week. They’re trying to lead again today and chip stocks have pushed to their highs in sympathy.
Meanwhile ETFs tracking software like
IGV
and
CLOU
have bled lower since the open.
Traders may want to keep an eye on this pattern given the potential catalysts this week. Congress may pass a coronavirus-stimulus bill. We also have ADP’s private-sector payrolls report on Wednesday, ISM’s manufacturing report on Thursday and non-farm payrolls on Friday.
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
One correlation recently been similar movement between semiconductors and industrials. (This chart shows the 10-day correlation between the Philadelphia Semiconductor Index and the
XLI
.) This isn’t a huge surprise because both are relatively cyclical. Stronger GDP growth tends to favor industrial equipment. It also boosts demand for chips.
On the other hand, software companies have benefited from the coronavirus lockdown for two reasons. First, more social distancing means more demand for cloud computing and videoconferencing. Second, weaker economic growth keeps interest rates low, which makes it easier to own high-multiple software names like
ZM
or
CRM
. Industrial stocks outperformed in mid-September before crashing along with the S&P 500 last week. They’re trying to lead again today and chip stocks have pushed to their highs in sympathy.
Meanwhile ETFs tracking software like
IGV
and
CLOU
have bled lower since the open. Traders may want to keep an eye on this pattern given the potential catalysts this week. Congress may pass a coronavirus-stimulus bill. We also have ADP’s private-sector payrolls report on Wednesday, ISM’s manufacturing report on Thursday and non-farm payrolls on Friday.
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
