Destruction is Creation
“Destruction, after all, is a form of creation.” — Graham Greene, The Destructors
Every market cycle has its demolition phase. Sometimes it’s loud, other times it’s quiet. But one way or another, the walls always come down before anything new can stand. That’s how markets breathe, through rotation, through renewal.
For the last few years, Industrial and Chemical names have been the abandoned lots of this market. Left behind, ignored, covered in the dust of higher multiple tech and high-growth stories. Nobody wanted to touch the old economy. Machines, materials, manufacturing… the things that actually make the world move, were treated like relics of a slower age.
But this is the part of the cycle where old things become valuable again.
When destruction clears the field, creation follows. The builders always come after the speculators.
The Setup: Pressure Building Beneath the Surface
Look at the data, it tells you what’s coming.
The Industrials sector ($XLI) has been range bound for three months, moving sideways while the rest of the market chopped back and forth. But here’s the important part: even in that range, Industrials have continued to outperform the S&P 500.
That’s strength. Quiet, steady, uncomfortable strength.
While everyone’s eyes were on AI names and mega cap tech, Industrials were tightening their coil. The relative performance line against the S&P never cracked. The sector didn’t break down, it refused to. That’s what compression looks like before expansion.
Today, we’re finally seeing the next move: XLI is breaking out.
The breakout is telling you the rotation is here. The baton is moving from imagination to implementation, from code to concrete, from pixels to production.
We’ve been ready for this all year.
Our portfolios have been long Industrials in 2025, across countries, stocks, and options. Not just in the United States, but globally — in Japan and Germany, where manufacturing is a cultural instinct, not a trend. Those allocations have already delivered large winners in the sector, confirming the thesis that global rotation is more than a U.S. story.
This isn’t speculation. It’s structure.
The Stock: 3M and the Chemical Resurrection
For years, chemical stocks were left for dead.
They were seen as slow, cyclical, and dull. The kind of businesses investors dumped when there was a hotter narrative to chase.
But markets are like nature. Nothing stays dead forever, it just waits for the right conditions.