Sector Correlation Climbs to a New High
Only this time, everything is going up together.
One-month correlation among the 9 large stock-market sectors reached the highest level since the data became available in 1997. The high correlation is similar to what we saw in October 2008 and March 2009 when everything went down together. Only this time, everything has been going up together. The key word in those 2 sentences is "together."
Click to enlarge
As you can see from this 19-month chart, that level of connectedness usually doesn't last. Also, you can see that this is nearly the exact opposite situation from last year. Last summer you had some industry groups cratering (energy and materials) while others moved higher (consumer staples and health care).
Note that this is actual correlation, as opposed to implied correlation, which is completely different. I plan on covering the latter quite extensively in the days ahead.
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