Jobs and Catalysts Ahead
January 7, 2022
Wednesday’s release of Fed minutes is still the main driver of recently higher nominal/real yields and value sector (Financials/Energy/Materials) outperformance. These and cyclical sectors (Industrials/Consumer Discretionary) have been strong since early December as markets looked through the Omicron wave on anecdotal evidence from So Africa and the UK about the severity of outcomes. But value and cyclical sectors are now overbought and not immune to broader risk-off sentiment. Any pullback should first be viewed as a buying opportunity. Support for the S&P 500 Value Index (SVX) sits in the 1510-1535 range, roughly 5% below current levels and relative strength increases our conviction for the index to outperform.