Market Chartbooks, Sep 5 2026 - The barbell blocks out the noise

The latest market chartbooks and their accompanying data sheets can be found below:

US equity sectors (PDF) - Here.

US equity sectors (Excel, view only) - Here

Global equities (PDF) - Here.

Global Equities (Excel, view only) - Here

Commodities, September 4 - Here.

I have changed the format a bit for these, and added a layer of automation. I now have a small AI agent which writes up a summary of the main themes from these chartbooks on a weekly basis. I will automate the updating in due course, but I still need to clean up the code set up the file structure in the cloud to allow the AI to run these without fault. Some testing will be needed. I am hoping that I will be able to run these weekly, with their associated summaries, and some editioralisation by myself when I feel like I need to add something. But that could be promising too much. We’ll see. I will continue to do the monthly Global Leading Indicator report. Remember that the OECD takes a publishing break over the summer and releases two months worth of LEI data in early September. These numbers should be out next week.

If you don’t like the idea of reading a partial AI summary, just look at the chart packs. AI is currently washing over the sell side research business and community like a tsunami. I am leaning in, but I am under no illusions that I know how the best use case of this technology will look for research and market commentary. I am experimenting such as it is.

The barbell blocks out the noise

These chartbooks capture market themes which presently exist in a vacuum from which the oxygen has been sucked out by fears over the sell-off in bonds, its drivers and implications for monetary policy, and the AI story, which continues to capture the attention of bulls and bears alike. These two themes will continue to dominate the main market narrative as speculation intensifies over whether the data are pulling the Fed towards tightening, perhaps as early as this month, or whether it will ride out the storm with no change in rates. In the AI story, meanwhile, the next big test of the bull market’s strength and resilience will be the much-awaited IPOs of the frontier labs—OpenAI and Anthropic—which require significant and ongoing injections of capital to stay alive, even as they remain the principal conduits through which AI is transmitted to the real economy.

The data point to a market regime in which risk appetite remains intact, but leadership is becoming more heterogeneous. In US equities, technology is still the strongest large-sector trend, yet the most conspicuous improvement is occurring in energy and healthcare, indicating a more diversified and somewhat defensive skew in recent market leadership compared to idea of technology as a singular leader. Globally, the return hierarchy is dominated by a handful of high-beta or idiosyncratic markets—most notably South Korea, Peru and Taiwan—while much of developed Europe and several Asian markets are losing relative momentum. Commodities offer a related but distinct message: energy and industrial metals are generating the strongest outright returns, although energy’s relative momentum has begun to fade, while agriculture is improving from a weak base.

This is not a clean, synchronised global reflation trade. The better description is a broadening of cyclical leadership beneath still-significant dispersion. Trend-following signals remain constructive in technology, energy, industrial metals and selected emerging markets, but several of the strongest performers are now losing relative momentum, sending a key signal for marginal portfolio decisions.

Equity markets: stronger breadth, wider dispersion

The US sector rotation map still places technology firmly in the leadership camp. XLK has delivered a one-year return of roughly 31%, the strongest result in the sector universe, and remains more than 20 percentage points ahead of the S&P 500 over that horizon. Its relative momentum has softened slightly over the past 90 observations, but not enough to invalidate the underlying trend. This remains a “buy weakness” rather than a structural reversal signal.

Energy is the more interesting marginal development. XLE is outperforming the index by almost 30 percentage points over one year and has gained roughly 18 percentage points of relative momentum during the past 90 observations. It therefore sits decisively in the upper-right quadrant: strong and still improving. This is mirrored in the commodity data, where energy has produced a sector return above 40% and remains the largest contributor to the benchmark’s annual gain. The overlap is unusually coherent: both the physical complex and listed energy equities are confirming the move. This story is market reflection of the macro story that global inflation risks have returned with the US-Iran war, adverse weather and a record El Nino, which is at least in part responsible for the synchronised lift in global bond yields.

Healthcare is the other clear improvement story. XLV has shifted into the upper-right quadrant with approximately 8% relative outperformance and a powerful acceleration in relative momentum. Its outright one-year return is still modest compared with technology and energy, but the inflection is important after a prolonged period of weak relative performance. Healthcare’s low-volatility properties also make it attractive if equity leadership broadens without a full risk-on melt-up.

The rest of the US sector picture is less convincing. Financials, real estate and staples are improving on a 90-day basis but remain annual underperformers. Industrials, utilities, discretionary and homebuilders are both below the index and losing relative momentum. Homebuilders are the weakest point on the map, underperforming by more than 30 percentage points with another material deterioration over the past quarter. That is a clear warning that the equity market is not endorsing a uniform lower-rate or housing-reacceleration narrative.

The position of consumer discretionary is similarly notable. XLY’s outright annual return remains respectable at roughly 17.5%, but it trails the S&P 500 by around 20 percentage points and continues to lose relative momentum. Staples also remain weak, leaving neither side of the consumer complex in a leadership role. Strong aggregate equity returns are therefore coexisting with a much less impressive consumer signal, likely reflecting the increasingly narrow base for US consumer strength in the ‘K-shaped’ economy.

Cross-correlations reinforce the message of dispersion. Most sector correlation z-scores are close to or below zero, rather than clustering at elevated levels. Financials and real estate have experienced especially sharp correlation declines, while energy stands out with a positive and rising z-score. This argues against interpreting the recent market as a single macro-beta trade. Stock and sector selection still have room to add value, but the increasingly common behaviour within energy also means that diversification inside that theme may be less effective than the number of holdings implies.

The portfolio results formalise this distinction. Over the latest 753 daily observations, the minimum-variance portfolio has an estimated return of 14.6% at 5.0% volatility, while the tangency portfolio raises the return estimate to 20.3% at only 5.9% volatility. These are attractive in-sample Sharpe ratios—2.89 and 3.42 respectively—but they should be read as optimisation outputs, not forward promises.

More instructive are the weights. The tangency portfolio maxes out its 20% constraint in technology, discretionary and world ex-US, while holding 19.3% in financials and 9.6% in industrials. The result captures established growth leadership but also buys improving cyclical breadth. Minimum variance is more defensive, placing 20% each in discretionary, staples and world ex-US, almost 20% in healthcare, and smaller allocations to financials, technology and utilities.

The momentum-selected risk-parity portfolio tells a different story again. Its universe is energy, technology, healthcare, world ex-US and materials, with allocations of roughly 14%, 15%, 23%, 25% and 22%. This is probably the cleanest representation of the present regime: structural growth, resurgent cyclicals, international diversification and a defensive growth component coexist in the same signal. Its estimated volatility is higher, at 8.9%, and its Sharpe ratio lower than the optimised portfolios, but it is less dependent on precise expected-return estimates.

Globally, dispersion is even more pronounced. South Korea is the exceptional winner, outperforming ACWX by about 125 percentage points over one year, although its relative momentum has begun to retreat. Peru and Taiwan occupy the strongest improving quadrant: Peru is approximately 42 percentage points ahead with slightly negative recent momentum, while Taiwan combines roughly 65 percentage points of relative outperformance with continued acceleration. Switzerland, Canada and Norway retain positive annual relative returns but are losing momentum.

The improving laggards include Japan, Germany, Denmark, New Zealand and India. They remain behind ACWX over one year, but their relative performance is turning upward. These are more credible contrarian candidates than markets still weakening in both dimensions. Brazil, Turkey, Indonesia and mainland China remain in the lower-left quadrant; Indonesia is particularly weak, while Brazil and China have yet to generate a persuasive relative inflection.

The global portfolio statistics capture the trade-off. The tangency portfolio delivers an estimated 19.8% return at 5.6% volatility, with 20% weights in India, Germany and Italy and meaningful allocations to Taiwan, Japan, Canada and Turkey. Minimum variance instead favours New Zealand, India and Germany at their 20% caps, supplemented by Japan, mainland China, France and Turkey. Neither portfolio simply chases the strongest trailing returns.

By contrast, the top-five momentum risk-parity basket is concentrated in South Korea, Taiwan, Peru, Norway and Brazil. Norway carries the largest weight at 34.8%, followed by Brazil at 21.2%, Taiwan at 19.7%, Peru at 16.7% and Korea at 7.4%. Its expected return is 26.5%, but volatility rises to 22.4% and the estimated Sharpe ratio falls to 1.18. This is a high-octane trend portfolio, not a diversified core allocation. The inclusion of Brazil despite weak relative positioning also underlines the difference between absolute momentum used for selection and performance relative to ACWX.

For trend followers, technology, energy, healthcare, Taiwan and Peru remain the strongest signals. For contrarians, the more attractive hunting ground is among improving laggards—Japan, Germany, Denmark and India—rather than simply buying the deepest losers. South Korea remains a powerful trend, but the combination of extreme relative gains and fading three-month momentum argues for disciplined position sizing.

Commodities: cyclical strength with rotation beneath the surface

The commodity complex has been a stand out performer this year more generally, and is now being led by energy and industrial metals, both with one-year sector returns of roughly 43%. Precious metals follow at about 21%, grains and oilseeds at 16%, and softs near 11%; livestock is the only sector with a negative annual return.

Breadth is strong across the main leaders. All industrial- and precious-metal contracts are positive over one year, while around 80% of energy and grain contracts and 75% of softs are higher. The complication is momentum breadth. None of the precious-metal constituents has improved its annual return over the past 90 observations, compared with roughly 40% in energy and 50% in industrial metals. Conversely, grains show 80% improving momentum breadth and softs 100%, despite still lagging the benchmark. Livestock has neither positive sector performance nor improving momentum.

The rotation map makes the distinction clear. Industrial metals are the only sector combining annual outperformance with improving relative momentum. Energy continues to outperform strongly, but its momentum is fading, perhaps an early warning to the positive energy equity story highlighted by the equity rotation charts. Grains and softs are improving but remain relative laggards; precious metals and livestock are both underperforming and deteriorating.

At the constituent level, heating oil is the standout trend, outperforming the AS Commodity Index by more than 70 percentage points and continuing to accelerate. The widening crack spread is real, and it is currently a key inflationary macro risk. Copper is also in the upper-right quadrant, approximately 20 percentage points ahead of the benchmark. Brent, WTI and gasoline retain positive annual relative returns, although their recent momentum has weakened. Aluminium and soybean oil are modest leaders but are also decelerating.

The improving-laggard quadrant is dominated by agriculture. Soybeans, coffee, cocoa, natural gas, silver and wheat remain below the benchmark over one year but have improved materially over the past 90 observations. Cocoa is the most extreme case: still roughly 50 percentage points behind the index, but with the sharpest positive momentum change. That creates a tactical rebound signal, though not yet a confirmed leadership transition.

The macro commodity ratios are becoming more cyclical. Copper has broken higher relative to gold, and industrial metals have moved decisively ahead of precious metals after an extended period of weakness. Energy has also recovered relative to precious metals. These are more consistent with improving industrial demand or supply-constrained cyclicals than with a purely defensive gold-led commodity rally. However, grains remain weak relative to energy, indicating that this is not yet a generalised food-and-input inflation shock.

The commodity trend trade therefore remains long industrial metals and selected energy products, particularly copper and distillates. The contrarian opportunity lies in improving agriculture and softs, but these should be treated as rebound candidates until their relative-return levels cross into leadership. Precious metals warrant more caution: annual performance remains positive and broad, but momentum has stalled across the sector.

The cross-asset conclusion is constructive but selective. Equity and commodity signals agree most clearly on energy and industrial cyclicality, while healthcare and selected developed-market laggards provide diversification. The principal risk is chasing extreme trailing winners without recognising decelerating momentum. The opportunity is to retain exposure to established leaders while gradually shifting capital towards assets moving from underperformance into genuine improvement.

Disclaimer

This material above is provided for informational and research purposes only and does not constitute investment advice, an investment recommendation, or an offer or solicitation to buy or sell any financial instrument. The analysis reflects the data, methodologies and assumptions described in the relevant chartbooks and should not be relied upon as the sole basis for any investment decision. Past performance, historical relationships and model-based signals are not reliable indicators of future results.

Certain summaries and commentary accompanying these materials have been generated or assisted by artificial intelligence. AI-generated content is based on the underlying research materials provided to the system and may contain errors, omissions or misinterpretations. Such content should therefore be treated as analytical support rather than independently verified research and should be considered alongside the underlying data and charts.

Readers should conduct their own analysis and, where appropriate, seek independent professional advice before making investment decisions. The author may hold positions in the securities mentioned above, and more generally, may be invested in the broader themes through other means.