Over the past several months, we’ve seen an important shift in market leadership. For much of the last two years, a narrow group of large technology companies has driven a significant portion of market returns. Recently, industrial companies have begun to outperform.
When leadership changes, the key question is not “what worked last month?” but rather, “is this durable?”
At US Advisory Group, we focus on the data that typically determines whether a shift is sustainable. Two indicators stand out right now.
Manufacturing Is Expanding Again
The ISM Manufacturing Index recently moved back above 50 — the level that signals expansion rather than contraction — marking its strongest reading in over a year.
That matters.
Industrial companies are directly tied to real economic activity: new orders, production, capital spending, and backlogs. When manufacturing expands, it supports earnings visibility in cyclical sectors.
If this improvement continues over the coming months, it provides real economic support for broader market participation — not just performance concentrated in a handful of technology names. One data point does not make a cycle, but this is a meaningful development.
Earnings Strength Is Broadening
We are also watching earnings revisions closely — specifically whether analysts are raising estimates across many sectors, or only within a small group of technology companies.
When earnings upgrades broaden, market leadership often rotates toward industrials, financials, and other cyclical areas. When strength narrows back to a few mega-cap growth names, technology typically regains relative leadership.
Right now, we are seeing signs of broadening. That supports the recent rotation — but we continue to monitor it carefully.
A Note on the Recent Supreme Court Tariff Decision
In late February, the U.S. Supreme Court ruled that existing emergency powers do not authorize broad unilateral tariff actions without clearer congressional delegation. Trade policy remains fluid, but this decision reduces one pathway for sweeping tariff expansion.
From an investment standpoint, the significance is modest but constructive.
Tariffs act as a cost layer within supply chains. Limiting broad tariff expansion reduces the risk of additional input-cost pressure — a small but positive development in an environment where inflation remains sensitive.
Sector implications are straightforward:
- Industrials may benefit from improved margin stability where imported components are involved.
- Consumer discretionary companies with global sourcing face less cost uncertainty.
- Technology hardware and semiconductor firms with international supply chains see reduced escalation risk.
- Transportation and logistics firms benefit from lower trade-friction uncertainty.
This is not a structural shift in global trade policy. But it does remove one incremental inflation risk at the margin — something markets are paying attention to.
How We’re Managing This
We are not making abrupt changes based on short-term sector performance. Instead, we are:
- Maintaining exposure to high-quality growth companies
- Ensuring portfolios are not underweight industrial exposure during a manufacturing rebound
- Monitoring earnings breadth to confirm whether leadership expansion is sustainable
- Watching inflation and policy developments closely
If manufacturing expansion continues and earnings strength remains broad, industrial leadership can persist. If growth slows materially or earnings narrow again, leadership may shift back toward technology.
Our focus remains consistent: diversified portfolios, disciplined adjustments, and decisions driven by economic data — not headlines.
