Yahoo Finance’s Post

🚀 Soaring Small-caps: The Great Rotation? Small-cap stocks have been on a remarkable upward trajectory, with #Russell2000 reaching a record 2024 high and outperforming #Bigtech over the last week. What is driving the rally? ➡ Ramping #Fed rate cut expectations which benefit small-cap companies that typically have higher debt loads ➡ Markets pricing in a #Trump presidency which could favor small caps amid potential tax cuts ➡ #Chip trade restriction announcements are questioning the #AI bull run ➡ Massive #valuation discount ➡ Record short positioning by #hedgefunds in small cap indices could be unwinding and driving momentum But there's reasons to be cautious here ➡ Rising #VIX indicates increased market volatility, not a great environment for small cap stocks ➡ Fed rate cuts may be slower in this cycle due to looser #fiscalpolicy ➡ Slowing demand makes small-caps riskier ➡ Small-cap index Russell 2000 is still grappling with an #earnings recession Two things to look out for this runup in small cap stocks to be sustainable: 1️⃣ Earnings recovery in small caps. 2️⃣ Can #soft-landing be achieved? Any risks of a sharp slowdown in #economicgrowth could quickly disrupt this small-cap rally. Instead of focusing solely on small-cap indices, investors may benefit from selecting individual stocks that demonstrate solid earnings growth or #profitability, manageable #debt levels and attractive #valuations to navigate the market effectively. #Investing #SmallCaps #StockMarket #MarketTrends #RateCuts #TrumpTrade #Geopolitics #AI #EarningsRecession #MarketStrategy Source: FT

#markets #magnificent7 The financial landscape is currently shaped by the significant influence of the largest tech stocks, known as the "Magnificent 7," on the S&P 500, highlighting the potential risks and strategic considerations for investors. Meera Pandit, CFA, Global Market Strategist at J.P. Morgan Asset Management, emphasizes the choice investors face between market cap or equal weight investment strategies. With the S&P 500 surpassing 5,200 and showing a year-to-date surge of 9.7% compared to the equal weight S&P 500's 5.7% rise, the dominance of the Magnificent 7, which constitute nearly 30% of the index, is evident. Pandit suggests that active stock selection can provide diversification while focusing on high-potential stocks, rather than just the biggest. Historical trends show that market cap outperforms during periods of momentum behind a few stocks, but reversals can occur, indicating opportunities for broader market participation. Lisa Shalett, Chief Investment Officer at Morgan Stanley Wealth Management, warns about the risk of overexposure to the Magnificent 7. These stocks' heavy weighting and high correlation within the S&P 500 could lead to significant index volatility if any of them were to falter. To mitigate this risk, Shalett advises diversifying investments to include U.S. bonds, non-U.S. equities, equal-weighted S&P 500 strategies, and alternative assets. The historical top-heaviness of today's market and the potential for interest rate impacts on growth-oriented tech stocks suggest a cautious approach.

Can just seven stocks make or break the performance of an entire index? Meet the "Magnificent 7." Let's discuss portfolio strategies to consider. #TheZoletLenetandFinkGroup

Can just seven stocks make or break the performance of an entire index? Meet the "Magnificent 7." Let's discuss portfolio strategies to consider.

Can just seven stocks make or break the performance of an entire index? Meet the "Magnificent 7." Let's discuss portfolio strategies to consider.

Can just seven stocks make or break the performance of an entire index? Meet the "Magnificent 7." Let's discuss portfolio strategies to consider.

Can just seven stocks make or break the performance of an entire index? Meet the "Magnificent 7." Let's discuss portfolio strategies to consider.

Can just seven stocks make or break the performance of an entire index? Meet the "Magnificent 7." Let's discuss portfolio strategies to consider.

Can just seven stocks make or break the performance of an entire index? Meet the "Magnificent 7." Let's discuss portfolio strategies to consider.

Can just seven stocks make or break the performance of an entire index? Meet the "Magnificent 7." Let's discuss portfolio strategies to consider.