The Great Rotation Accelerates

Issue 42;

• Healthcare leads the rotation.
• Technology under pressure.
• Smells like a bear, but too early to tell.

The World Index dropped to a ByteTrend Score of 3, but more likely a 2, as the 30-day moving average appears to be falling. The price has touched the 20-day min (red) and is below the 30-day moving average. With an upward-sloping 200-day moving average, it is too early to cry bear, despite our suspicions.

World Index – Developed Markets – Daily

Many defensive stocks with low volatility have caught a bid, while the riskier high volatility stocks continue to weaken. In 2022, this correction was over 50%. If that is repeated, the recent market top will start to look like a major top that could last for years.

World Index – Developed Markets – Daily

Market breadth has weakened with fewer stocks in uptrends (blue) and more stocks in downtrends (red).

ByteTrend: Weekly Breadth Signal – Local Currency

Yet more sectors have shown strength than weakness. Real estate and consumer defensive have perked up, joining financials, utilities, and the recent start sector, healthcare. The weak sectors are technology, which had a notable downturn, communications (internet), and industrials.

CAPR: Global Sectors

The world matrix shows the US a little stronger than last week, as Asia and Europe fall back. The top four are unchanged from last week, but tech hardware in fifth place is weaker. At the bottom of the list, food & beverage and REITs are stronger. The healthcare and life sciences sector keeps on climbing up the ranks.

Average ByteTrend Score by Region and Industry Heatmap - CAPR

This is a negative rotation, as the market has fallen, and there are fewer leading and emerging   trends in local currency terms. There is also an increasing number of weakening and bearish trends. This is net bearish, but the stocks that are improving will make up the safe havens.

Global Trend Classification – Local Price

Leading Trends with New Highs

These stocks are trading at the 30-week CAPR highs with a ByteTrend Score of 5. All charts shown are CAPR rebased to 100.

Eli Lilly

Obesity drugmaker Eli Lilly has won the two-horse race with Novo Nordisk for now. It suffered its worst day in August, falling 14%, but strong sales momentum, good drug approval news, and the hope of favourable policymaking have turned it around.

AstraZeneca

AZN’s CEO has been in place since 2014 and has done a fantastic job. He quickly ramped up their R&D spend, leading to better innovation and improved product sales. Free cash flow per share has shown strong and steady growth ever since.

Gilead Sciences

HIV and oncology-focused Gilead will invest $30 billion by 2030 in US manufacturing and R&D, in response to the tariff regime. It continues to publish pro-American press releases, highlighting its economic contributions to the nation. It’s a prime example of a company playing up to the America First Global Health Strategy.

McKesson

McKesson is a diversified healthcare services company. It is seeing higher margins in its US business thanks to an increased share of speciality medicines in its product mix and further automation of its operations, with 90% of distribution centres fully automated.

There are 94 additional leading trends with new highs in the GTI universe. India is back, along with Brazil and Israel. High-end retail shows up, alongside old media. Healthcare continues to do well, and some REITs have come through. The tech list is thin, as are industrials. Utilities feature.

Emerging Trends

These stocks are trading at the 30-week CAPR highs with a ByteTrend Score of less than 5. They don’t have to be in an uptrend, just emerging. All charts shown are CAPR rebased to 100.

Roche

Swiss pharma giant Roche saw 13% volume growth of its pharma segment, driven by 15% growth in the haematology division, led by Hemlibra, its bleeding reduction drug. So far, it has moved ten drugs into Phase III trials in 2025, a record number, leading them to raise their estimated portfolio value by 27%.

Merck

Merck is acquiring Cidara Therapeutics for approximately $9.2 billion in a deal that will add the experimental flu drug, CD388, to their pipeline. Its Phase II data showed 76% efficacy, with a target population of around 110 million patients in the US.  

Danaher

Life sciences company Danaher reported 10% EPS growth in Q3, largely driven by operational efficiency rather than strong sales growth (3%). Its cash flow conversion was over 100%, and it’s buying back shares at a good rate after a long period as a net issuer.

There are 64 additional emerging trends in the GTI universe. Malaysia stands out, as it did last week. Healthcare dominates the list, along with metals and mining. Once again, some retailers show up, and it’s good to see transport and logistics enjoy better days.

Weakening

These stocks are trading at the 30-week CAPR lows with a ByteTrend Score above 0. They are weakening trends but not yet downtrends. All charts shown are CAPR rebased to 100.

Microsoft