The Return of Volatility

Following last week's return of volatility and Monday's expected follow-through, we issued our weekly Sector Note on Tuesday.

The long-term advance is intact but experiencing a correction. The shock to sentiment is a function of sustained complacency, and at present does not appear to represent more than an intermediate-term downtrend or, more accurately, a correction. Defensive sectors are the beneficiary of both a relative lack of selling, and heavier selling in the cyclical sectors and as such, the cyclicals will require time to repair.

Backing-and-filling favors relative value seekers. Commodities eased globally and likely add to emerging favorable momentum to Energy and Materials, however these remain in the speculative domain for all but the deepest value investors.

Sentiment remains the principal market driver as excess credit fades and the cycle matures. Please see our 5/29/15 Strategic Focus for our analysis of both excessive historic valuations and analysis of the long-term cyclical component in sector profit margins.

Please contact us for a copy of the report and to view all disclosures.


Steven Charest Managing Director, Chief Market Strategist

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