Strategas Securities’ Chris Verrone observes that the market’s division is not new, but has become more pronounced recently due to significant market movements. Verrone highlighted an imbalance where 20-day lows exceeded 20-day highs among S&P 500 constituents, a trend that, while occasional in uptrends, should not become habitual.
According to Verrone, the last significant expansion in new highs occurred five months ago. He suggests a reset of the market’s momentum profile is needed to extend into 2026. This is particularly relevant given rising investor sentiment, exemplified by a 4 to 1 bull/bear ratio in the latest Institutional Investor survey. While high sentiment can persist, it raises expectations amidst subtle shifts in market leadership.
Verrone also notes that financial stocks, especially regional banks, have underperformed due to the flattening yield curve. The 2/30 yield curve is approaching oversold territory and support levels. Its potential response will be a key focus in the coming weeks. Strategas Securities is a research-driven brokerage firm that provides institutional investors with macro strategy, investment strategy, and sector strategy research. The company aims to deliver actionable insights and differentiated perspectives.
Despite these concerns, the consumer staples sector remains near its relative lows, a position it has held for most of the year. Verrone acknowledges the difficulty of making sentiment calls in the fourth quarter due to strong seasonality and refrains from doing so, while also recognising these underlying market dynamics.
