Weekly Intermediate: Fixed Income Breaks Into Defensive Rotation

Bond weakness deepened while equity leadership narrowed to growth

In the week just closed, fixed income turned decisively more defensive across our coverage. Only 4 of 17 ETFs (24%, -52.9pp) held above their 13-week moving average, down from 76% a week earlier, while 11 of 16 (69%, -6.2pp) still outperformed the Aggregate Bonds AGG, leaving a -45pp gap that marks active rotation rather than broad confirmation. The survivors sit in credit, preferreds, munis, TIPS and short duration; Treasuries, mortgages and long duration led the deterioration.

Equity remains benchmark-led, not broad. 45 of 59 ETFs (76%, -10.2pp) held above their 13-week moving average, but only 8 of 58 (14%, -3.5pp) beat the S&P 500 SPY, a +62pp gap as US growth and technology, alongside Taiwan and South Korea, carried relative leadership while emerging markets, developed ex-US, small caps and low-volatility exposure failed to confirm.

The same benchmark-led character holds in specialty: 12 of 15 ETFs (80%, unchanged on the week) stayed above their 13-week moving average, yet only 4 of 15 (27%, -6.7pp) outperformed the S&P 500 SPY, with semiconductors, momentum and bitcoin exposure leading while equity overlays, gold and gold miners lost ground. In commodities, broad commodities and oil improved on a relative basis, while Silver SLV crossed below its 13-week moving average.

13-Week Intermediate Breadth

Key Takeaways

• Emg. Markets EEM and Russell 2000 IWM both crossed below their 13-week ratio moving average versus the S&P 500 SPY, with -2.07% and -2.73% 13-week relative returns. That fits the broader cross-timescale picture across our equity universe: US growth and technology still lead, while small caps, developed ex-US, and much of the cyclical complex remain on the wrong side of relative performance.

• Global Bonds BNDX, EM Sovereign Bonds EMB, Investment Grade Credit LQD, Muni Bonds MUB, TIPS TIP, Corporate Credit VCIT, and Short Corporate VCSH all crossed below their 13-week moving averages on price. Several of those segments still beat the Aggregate Bonds AGG. We treat the move as rate sensitivity and duration pressure rather than a uniform credit breakdown; short-duration strength reads as stability, not risk appetite.

• Min Volatility USMV reclaimed its 13-week moving average on price even as low-volatility and other equity overlays continue to lag the S&P 500 SPY. At the same time, Biotechnology IBB fell below its 13-week moving average and Ethereum Trust ETHA crossed below its 13-week ratio moving average versus SPY. Elsewhere, Broad Commodities PDBC, with a +20.80% period relative return versus SPY, crossed above its 13-week ratio moving average, while Silver SLV crossed below its 13-week moving average.

FEATURED ETF — Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF PDBC vs SPY

Other Technical Signal Events

EQUITY

↗ Price breakouts (cross-up 13W MA)

• XLP - Consumer Staples Select Sector · 13W perf: -4.9%

• XLE - Energy Select Sector · +10.1%

↘ Price breakdowns (cross-down 13W MA)

• EWU - iShares MSCI United Kingdom ETF · 13W perf: -3.6%

• DVY - iShares Select Dividend ETF · -3.7%

• EWZ - iShares MSCI Brazil ETF · -4.8%

• XLB - Materials Select Sector · -5.2%

• FXI - iShares China Large-Cap ETF · -5.6%

• EWG - iShares MSCI Germany ETF · -5.9%

• MCHI - iShares MSCI China ETF · -6.1%

• INDA - iShares MSCI India ETF · -9.3%

↗ Leadership gains (cross-up 13W MA vs SPY)

None for the week

↘ Leadership losses (cross-down 13W MA vs SPY)

• EEM - iShares MSCI Emerging Markets ETF · 13W relative perf: -2.1%

• IWM - iShares Russell 2000 ETF · -2.7%

FIXED INCOME

↗ Price breakouts (cross-up 13W MA)

None for the week

↘ Price breakdowns (cross-down 13W MA)

• TIP - iShares TIPS Bond ETF · 13W perf: -0.2%

• VCSH - Vanguard Short-Term Corporate Bond · -0.6%

• MUB - iShares National Muni Bond ETF · -1.2%

• EMB - iShares J.P. Morgan USD Emerging Markets Bond ETF · -1.5%

• VCIT - Vanguard Intermediate-Term Corporate Bond · -1.8%

• BNDX - Vanguard Total International Bond · -1.9%

• MBB - iShares MBS ETF · -2.1%

• LQD - iShares iBoxx $ Investment Grade Corporate Bond ETF · -2.2%

↗ Leadership gains (cross-up 13W MA vs AGG)

None for the week

↘ Leadership losses (cross-down 13W MA vs AGG)

• MBB - iShares MBS ETF · 13W relative perf: unch.

SPECIALTY

↗ Price breakouts (cross-up 13W MA)

• USMV - iShares MSCI USA Min Vol Factor ETF · 13W perf: -1.1%

↘ Price breakdowns (cross-down 13W MA)

• IBB - iShares Biotechnology ETF · 13W perf: -3.2%

↗ Leadership gains (cross-up 13W MA vs SPY)

None for the week

↘ Leadership losses (cross-down 13W MA vs SPY)

• ETHA - iShares Ethereum Trust ETF · 13W relative perf: -0.2%

COMMODITIES

↗ Price breakouts (cross-up 13W MA)

None for the week

↘ Price breakdowns (cross-down 13W MA)

• SLV - iShares Silver · 13W perf: -1.0%

↗ Leadership gains (cross-up 13W MA vs SPY)

• PDBC - Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF · 13W relative perf: +20.8%

↘ Leadership losses (cross-down 13W MA vs SPY)

None for the week

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.