03/09/2026 ValuEngine Weekly Market Summary & Commentary

As global US military initiatives continue to expand, geopolitical uncertainty has accelerated. Sector performance has been dominated by a “great rotation” into defensive and energy stocks. The two most defensive sectors classic are consumer staples and utilities. Using the State Street Select Sector SPDR ETFs for representative comparisons year-to-date, we find that Select Sector SPDR Consumer Staples, XLP, and Select Sector SPDR Utilities, XLU, have significantly outperformed the broader market with price gains of 15% and 11% respectfully while the SPDE S&P 500 ETF, SPYM, declined 1.2%. Given that Iran is one of the largest exporters of petroleum in the world, it is no surprise that Select Sector SPDR Energy, XLE, has the top year-to-date performance of the series at 24%.

With the war in Iraq driving economic expectations in the near-term future, XLE may not be relinquishing its leadership in the near future. This has fueled inflation expectations. Another issue here is that the Select Sector SPDR Consumer Discretionary, XLY, has the worst year-to-date performance with a 3% loss. When XLP is rising while XLY is falling, it indicates that the consumer has restricted non-essential spending out of perceived necessity. During the 15-year bull run of the stock market since 2010, the overarching story had been the resilience of the American consumer, often in defiance of negative expectations by major economists. Therefore, the rise of cash flows into XLP in tandem with negative cash flows for XLY is a bad sign for economic expectations.

Meanwhile, the stocks of mining companies and energy companies have been rising for some time and should continue for the time being. The StateStreet S&P Metals and Mining ETF, XME, continues to be rated 5 (Strong Buy). However, all of its top 10 holdings are rated 10% or more, most much more, overvalued by our valuation model. Considering that XME has risen more than 90% over the past 12 months, sky-scraping valuations are not a shock. Since there are many logical reasons that the commodities rallies will continue, we do not advise bucking the trend. At the same time, when an ETF becomes this top-heavy, the risk here is that when the trend reverses it won’t inch downward but is much more likely to sink like a stone. Another beneficiary of the early “wartime economy” has been the Aerospace industry. The iShares ETF representing the industry, ITA, is still rated 5 (Strong Buy). However, two of its top holdings that are rated 3 (Hold) look especially vulnerable. They are Boeing (BA) and Axon Technologies (AXON). From our perspective, this might be a good weekend to lighten up some over-weighted positions.