While the S&P 500 is within a few points of a new all-time high, the defensive Utilities sector continues to lead (XLU is up 7.5% this year versus a flat S&P 500). This could be a cautionary signal for the markets in the weeks to come.
After having a highly negative correlation for much of the year, bonds and equities have been more correlated since the release of the FOMC Minutes on Wednesday. US is seeing this again today with bonds and equity both higher.
Emerging Markets are leading today, with continued strength in emerging-market bonds . While there is supposedly an ongoing “crisis” in emerging markets, market prices are no longer confirming this view. This is a notable change in character and given that sentiment and fund flows reflect extreme negativity in emerging markets, we could be in the early stages of a sharp move higher in these shares.