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SPDR S&P Retail ETF (XRT) & Invesco Dynamic Leisure and Entertainment ETF (PEJ)

With the exception of a one-day relief rally, equity markets have continued to struggle, impacted by a number of cross currents. Much of the focus has been on the political tensions between Ukraine and Russia. In addition to impacting equity market sentiment, this situation has reignited interest in Gold as a defensive haven in times of crisis over the last week sending the yellow metal to its highest level since last June. Crude oil has been up and down over the last week, but remains elevated with both WTI and Brent holding above $90.00/bbl.

Other issues continue to simmer away in the background. Most notably, a rotation away from stocks which had benefitted from the stay-at-home economy, and back toward sectors which could benefit from an end to pandemic restrictions continues to accelerate. Shopify became the latest victim of this change with its stock plunging 16.0% yesterday after management warned that sales growth could slow as online pandemic shopping slows. Meanwhile the Daily Stock Reports of the last three days have featured travel booking and hotel companies, a sign that leisure/travel stocks have been moving back up the rankings in SIA Charts relative strength reports.

Inflation and the prospect of more central bank rate hikes this year also remains a concern. This week, the US 10-year treasury note yield climbed back above 2.00%, a key psychological level which aligns with the long-term inflation and interest rate targets of several major central banks.

Monday is a holiday in the US and Canada but around that there are a number of significant economic and corporate reports. We continue to move through the peak of earnings season in Canada with reports on the way from miners and retailers this week which then segues next week into bank earnings season. In the US results are set to roll out from major retailers starting with Walmart today.

In this issue of Equity Leaders Weekly, we take a look at current trends in the retail and leisure sectors.


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