There’s plenty to like about this bull market — breadth is expanding, Emerging Markets are breaking out, and small-caps are holding above prior cycle highs.
On the surface, things look solid.
But beneath the headlines, rotation is starting to raise some real questions.
That type of leadership aligns more with risk-off behavior than a strong, risk-on bull market.
So I want to highlight two divergences that have my attention.
First, the S&P 500 vs. Consumer Staples ratio.
When this ratio is rising, investors are embracing risk. That’s what strength looks like.
When it’s falling, capital is rotating toward safety. That’s typically a sign of caution.
Lately, that line has been rolling over, hinting that risk appetite may be slowing even as the index holds.
The same dynamic is showing up in the High Beta vs. Low Volatility ratio.
It stopped advancing in early January and has failed to confirm the new highs in the index — forming a bearish divergence.
High Beta underperforming its Low Volatility peers is not characteristic of a healthy bull market — at least, that’s the way I’ve learned to read it.
So do these divergences really matter?
Is this simply a pause within an ongoing bull market?
Or is the market quietly signaling something larger ahead?
On the bull side, equities continue to perform well overall despite defensive outperformance. And that resilience matters too.
Until price breaks down and leadership truly deteriorates, the primary trend remains higher — and the benefit of the doubt still belongs to the bulls.
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