###POV: CYCLICAL DISCONNECT: The current....>

US TSYS: ###POV: CYCLICAL DISCONNECT: The current Fed hiking cycle and the

outperformance of cyclical stocks has gone hand-in hand since early 2016, but

this relationship has broken down (see charts: https://tinyurl.com/yahy7vh8).

- And historically, Cyclical outperformance has been accompanied by rising US

Tsy yields, and vice-versa.

- But the Consumer Discretionary/Consumer Staples (reflecting cyclical equity

performance) ratio has clearly decoupled from US Tsys since Oct 8th.

- A recoupling of these relationships would mean either renewed outperformance

of cyclicals, or lower yields.

- Broad equity market weakness may not stop the Fed from hiking, but the

composition of the downturn may prove consequential for the economic outlook.

- S&P 500 is down around 10% from the Sep 21 record high, but cyclical sectors

are down more, including Autos (15%), Homebuilders (20%), and Materials (17%). 

- And Utilities, a classic defensive play - are actually up 4%.

- This rotation may be pointing to underlying U.S. economic weakness ahead.