Lately, I’ve been talking about how the market is favoring “risk-off” assets—Gold, Utilities (XLU), Energy (XLE), and Materials (XLB) have been outperforming, while higher-risk plays like Bitcoin, Consumer Discretionary (XLY), and Communication Services (XLC) have struggled.
Even Magnificent Seven stocks (MAGS) have taken a hit.
So what does “risk-off” actually mean?
It’s when investors get cautious and start shifting money into safer, more stable assets. This means things like gold, bonds, and defensive sectors like Utilities and Consumer Staples. These assets tend to hold up better when the market gets jittery.
On the flip side, when the market feels good, traders pile into “risk-on” plays—growth stocks, speculative tech, and other assets that thrive in bullish conditions.
Right now, we’re seeing a lot of push-and-pull between these two forces.
When risk-off trades get too stretched, we tend to see a “snap-back” effect. That’s exactly what happened with Financials (XLF) last week.
If you joined my FREE Mapping the Market session last week, I gave it out as a free trade idea.
It dropped 2-3%, then ripped higher by over 4% in just a few days just like we predicted. That kind of whipsaw action is exactly what I’m looking for—opportunities to jump in when the pendulum swings too far in one direction.
What’s Next? Watch the Nasdaq
Forget the S&P 500 for now. The real action is in the Nasdaq (QQQ). It was the first to break to all-time highs, and that makes it the leader.
As you can see, it’s right at all-time highs, which is a big decision point
And this week, we’ll get our answer: does the Nasdaq “break and run” higher, or does it reject this level and roll over?
Whichever way it goes, expect the S&P 500 to follow suit.
So, keep an eye on QQQ. If we see strength, it’s a sign that risk-on is coming back into favor, and we’ll want to lean into growth.
But if it starts to falter, expect more of the same—defensive plays leading while riskier assets take a backseat. Either way, there’s money to be made if you’re paying attention.
— Nate Tucci
P.S. I have a trade targeting about 200% that is still active. If you want the details on how it works, make sure you join me @ 12pm today for our live briefing. Click here to join the session
