HSBC Asset Management reports that global equities were broadly stable, but sector rotation remains prominent, with investors shifting from expensive technology into cyclicals like Industrials and Materials. The firm also highlights 2026 leadership from Energy and Materials alongside strong performance in Consumer Staples, Utilities and small caps, underscoring a confusing mix of early-, mid- and late-cycle signals across equity sectors.

Cyclicals, defensives and small caps all bid

"But the investment clock seems to have gone haywire. Like some jet-lagged business executive, it can’t work out what time zone it is in."

"In 2026 so far, Energy (+19%) and Materials (+16%) are the sector leaders, with Industrials not too far behind. But defensive bets in Consumer Staples (+11%) and Utilities (+9%) are also performing strongly."

"And price action in small-cap stocks (+9%) confuses things even more. The signal seems to be that we are simultaneously in the early, mid, and late cycle!"

"Global equity markets were stable in a holiday-shortened week. In Europe, both the Euro Stoxx 50 and the UK FTSE 100 reached record highs."

"In the US, while the S&P 500 was set to close the week modestly higher, sector rotation remained a key theme, with investors continuing to shift out of relatively expensive tech stocks into cyclicals such as industrials and materials."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)