Tech shares have dominated a reluctant January rally that finally pushed the S&P 500 into record territory at the end of last week. History says the sector is unlikely to repeat its market-leading ways in February, according to analysts at Jefferies.
“Tech is the pound-for-pound champion of January, and it isn’t even close,” they said in a note distributed Saturday. Pointing to seasonal factors, they argued that a leadership change is likely in February.
The sector’s nearly 5% month-to-date January gain smokes the S&P 500’s 1.5% rise.
The problem is that tech — and all the traditionally defensive sectors, such as utilities, consumer staples and healthcare — tend to underperform in February, they observed, while some of the core cyclicals (materials, energy and industrials) flourish (see chart below).
Jefferies
Tech is supporting the S&P 500 and helping to keep the tech-heavy Nasdaq-100
NDX,
tracked by the popular Invesco QQQ Trust Series ETF
QQQ
at highs, but a change in leadership maybe in store as earnings season continues, Jefferies said.
“We continue to see [opportunity] for cyclicals this year, and this could be a sign when they will get their first crack,” the analysts wrote.
See: S&P 500 closes at a new record high. Here’s what history says could happen next.
