FX Evolution: The Best Stocks Are Not Leading

The past few weeks has seen a shift in the markets. It’s a small one, but a key one. For most of 2023, the market’s move higher has been driven by big-cap tech stocks. They’re the ones best suited to profit from developments in artificial intelligence.

However, as big as the potential is for AI, it’s only a small part of the economy. People need to go places and do things in the real world too.

That’s why the recent market rally, driven by a shift in stocks leading the move higher, looks positive. It’s not just tech stocks dominating the overall market move higher.

Tech stocks have even had a few down days while the rest of the market has rallied.

This concept is known as rotation. And it indicates that investors are looking to take some profits in winning stocks, such as the AI trades.

Sectors such as gold and materials have been big winners in the past few weeks. That’s a sign that the economy continues to grow and expand, increasing demand for those goods.

Other lagging sectors that haven’t had a run yet include consumer staples and healthcare. A move higher in those sectors could move markets higher overall, even if tech doesn’t play along.

Investors who rotate to those overlooked sectors may get the best returns in the months ahead.

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