Sector Momentum: Healthcare Leads at 12.5%

Low-Beta Leadership Defines Sectors

Low-beta leadership defines the eleven S&P 500 sector ETFs as of July 31, with 7 above zero on 3M momentum. Healthcare XLV leads at 12.5%. The 1.9% median fell 3.7pp from last week. The bottom communication-linked sector trails at -7.0%, and the top-bottom spread is 19.5pp. The top tier is concentrated and defensive, with only three sectors above 8%, so breadth has less force than the headline count suggests.

XLV’s -0.57 correlation to SPY pairs the top sector with an inverse link, and the convex uptrend means the leadership is gaining pace. Financials XLF broke out at 10.1% after a +0.2pp rise. Technology XLK followed at 8.5% after a -1.4pp fade. The upper tier combines one accelerating defensive and one fresh cyclical breakout, and the linkage profile stays muted across both leaders.

Utilities 3M Momentum Turned Negative

Utilities XLU turned negative at -4.1% after a -5.0pp drop, and its -0.52 correlation to SPY is a short-window inverse reading off a near-zero baseline. Real Estate XLRE fell to 2.6% after a -3.2pp slide, and Energy XLE dropped to 1.9% after a -3.7pp fall and now sits in a stabilizing downtrend. The defensive shelf cracked in utilities and softened in rate-sensitive cyclicals, so the middle of the sector table lost support.

Consumer Discretionary XLY rose 5.7pp to -1.9%, and its 1.41 beta keeps the rebound in a high-amplitude cyclical bucket. Industrials XLI slipped to 4.2% after a -2.0pp move, Consumer Staples XLP was unchanged at 1.8%, and Materials XLB eased to -1.4%. Communication Services XLC stayed last at -7.0% after a +0.8pp lift, with a market beta of 1.00 that keeps the laggard aligned with SPY. Cyclical rebounds appeared, but negative sectors cluster in high-beta and rate-sensitive groups, which leaves the sector map defensive at the top and fragile underneath.

S&P 500 Sectors ETFs Heatmaps

S&P 500 Sectors ETFs: 3M Momentum

S&P 500 Sectors ETFs: 3M Correlation vs SPY

S&P 500 Sectors ETFs: 3M Beta vs SPY

Romain Gandon
CEO, Quantlake

Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. Past performance is not indicative of future results.