From March 2020, the stock market has been experiencing a relentless advance, highlighted by outperformance in many frothy and speculative parts of the market such as Special Purpose Acquisition Companies and electric vehicles. However, since mid-February, these areas of the market have experienced deep corrections.

Yet, there have been limited corrections in the major averages. This increases confidence that this market action is more of a pause in the bull market rather than a major correction. These consolidations are characterized by money staying in the market but moving from one part to the other.

Steel Outperforming

Some of the strongest performers have been areas are connected to housing, industrials, and infrastructure as these tended to keep trending higher. It's also no coincidence that steel stocks have also been particularly strong as that sector tends to benefit from strength in these parts of the economy.

Steel prices have risen sharply over the past year and are nearing a 10-year high. Some of the contributing factors are strong demand which should remain strong due to fiscal stimulus, infrastructure spending, and a strong housing market. Additionally, the last decade has seen no increase in production despite the world's population growth.

Production has also been adversely affected by supply chain disruptions due to the coronavirus which continues to ripple across the global economy. And, this is exacerbated by many companies who practice a "just-in-time" inventory system. This works great when there is no shortage of supply but can lead to lower levels of production during these conditions.

Steel Outlook

Steel stocks have been outperforming on multiple timeframes. The VanEck Vectors Steel ETF (SLX  ) is up 20% YTD, while the S&P 500 (SPY  ) is up 7%. Further, SLX made higher highs and lower lows during the market's consolidation and looks poised to continue higher if the market resumes its advance.

This also seems likely due to the economic outlook continuing to improve and the early indications that President Joe Biden's $2 trillion infrastructure plan should pass Congress with the same tight margin as the previous stimulus. The country also continue to get vaccinated and recent data shows the vaccine is effective in stopping asymptomatic spread and also works in kids. These developments increase the odds that the country will return to normal by Q4.