Market Moves

For the second day in a row, the broader indexes of the U.S. stock market remained largely unchanged by the close of the session. Even though the Fed announced a quarter-point rate cut yesterday, investors were unwilling to accept this information as a sign that it is time to buy more stocks. This appears particularly poignant as prices return to their former highs, as if they were hitting some unseen level of resistance at current prices.

With prices so far stalling out at previous highs, the S&P 500 index has failed to extend its growth streak this year. In fact, at the current time, the utility sector is notably outperforming the large-cap index. The idea that markets are showing a preference for low-volatility, dividend-heavy stocks typically means that investors are nervous about the prospects for growth among typical blue-chip stocks.

Chart showing the performance of utility stocks

Homebuilding Sector Remains Strong

Despite market rate cuts, Middle East uncertainty, and mixed news regarding housing starts and new permits, the homebuilder sector is flush with stocks that are generally on the rise. A daily chart of the SPDR S&P Homebuilders ETF (XHB), shown in the chart below, reveals that this fund has bested the S&P 500 handily in 2019. This chart likely obscures how well a few of the individual stocks may be doing among those stocks represented within the sector ETF.

Chart showing the performance of homebuilder stocks

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Cannabis Stocks Burning Out as Investors Shun Risk

Cannabis Growth Corporation (CGC) and other stocks in the sector have seen a dramatic fall from their peak prices earlier this year. Like many companies in the sector, the company finds itself overcapitalized without sufficient fundamental growth to warrant greater growth expectations. As a result, the Horizons Marijuana Life Sciences ETF (HMMJ) has given up all of its gains and is currently showing zero return for the 2019 calendar year to date.

Chart showing the performance of cannabis stocks

The Bottom Line

U.S. stocks and other asset classes remained largely unchanged despite the Fed announcement yesterday. Investors appear to be avoiding any more risk and showing a preference for lower-volatility investments such as utility stocks. One exception to this is homebuilding stocks, which are doing quite well. An example of risk aversion right now is the trend of cannabis stocks, which are decidedly down from their high this year.

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