Investors preference between XLP and QQQ is important to pay attention to as it shows the trade-off of "risk off equities" (XLP) versus "Risk on equities" (QQQ). The last time XLP was at these levels relative to Tech was in 1999!
The chart above shows XLP/QQQ. As you can see, XLP outperforms heavily during larger degree market corrections. Since December 2021 Staples have been on a tear due to inflation and the Invasion of Ukraine. Investors are clearly spooked. Instead of investing in speculative tech stocks, they are looking towards investing in markets that have stable demand. Staples are the essential products used by consumers.
If there is to be a bigger market drawdown, we will need to see stronger outperformance by XLP. Weakness in XLP is definitely a bullish sign for markets.
The Orange Lines show periods where XLP outperformed QQQ.
The Blue Lines represent Bullish target areas for XLP.
The chart above shows XLP/QQQ. As you can see, XLP outperforms heavily during larger degree market corrections. Since December 2021 Staples have been on a tear due to inflation and the Invasion of Ukraine. Investors are clearly spooked. Instead of investing in speculative tech stocks, they are looking towards investing in markets that have stable demand. Staples are the essential products used by consumers.
If there is to be a bigger market drawdown, we will need to see stronger outperformance by XLP. Weakness in XLP is definitely a bullish sign for markets.
The Orange Lines show periods where XLP outperformed QQQ.
The Blue Lines represent Bullish target areas for XLP.