economy
February 24, 2026
Defensive stock outperformance is flashing a warning sign for the stock market
Something bad may be happening under the hood in the stock market.
TL;DR
- Consumer staples and energy stocks are up significantly over the past quarter, while financials and technology are down.
- This divergence has occurred twice before (1990 and 2000), both followed by broad market struggles and declines in the S&P 500.
- Energy is the best-performing S&P 500 sector year-to-date (up nearly 23%), and consumer staples are up almost 15%.
- The S&P 500 tech sector is down over 4% year-to-date, and financials have shed 7.7%, making it the worst-performing sector.
- Despite the concerning rotation, the outlook for stocks overall for the year remains bullish due to potential Federal Reserve rate cuts and corporate earnings growth of at least 10%.
- A market recovery is dependent on technology and financials leading the way, as they are currently underperforming.
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