Sector Momentum Map: Cyclical & Defensive Leadership, Tech Lags

SmartReversals
02-26 13:41

Sector rotation occurs because different industries respond uniquely to interest rates, inflation, and consumer demand.

  • The Early Stage: Falling interest rates typically breathe life into the Information Technology and Real Estate sectors as borrowing costs drop.

  • The Late Stage: As an economy overheats and inflation stays “sticky” (as forecasted for much of 2026), investors rotate into Energy and Materials to hedge against rising prices.

  • Defensive Shifting: When growth concerns arise, “smart money” often flocks to Consumer Staples and Health Care, which are sectors that provide essential services regardless of economic health.

For new investors: the Momentum Map visualizes where each sector stands regarding its recent momentum and relative strength against the S&P 500 $S&P 500(.SPX)$ .

Each sector is in one of four quadrants. Currently, $Consumer Staples Select Sector SPDR Fund(XLP)$ $Industrial Select Sector SPDR Fund(XLI)$ $Materials Select Sector SPDR Fund(XLB)$ $Energy Select Sector SPDR Fund(XLE)$ are Leading.

$Health Care Select Sector SPDR Fund(XLV)$ is Weakening. Meanwhile, the Lagging quadrant houses $Technology Select Sector SPDR Fund(XLK)$ $Communication Services Select Sector SPDR Fund(XLC)$ $Consumer Discretionary Select Sector SPDR Fund(XLY)$ $Financial Select Sector SPDR Fund(XLF)$ $Real Estate Select Sector SPDR Fund(XLRE)$ $Utilities Select Sector SPDR Fund(XLU)$ are Improving.

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Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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