Teeter: Large cap tech and small caps both look compelling

Core Viewpoint - The market is expected to have more upside following the Fed rate cut, with potential continuation into next year due to strong earnings and economic cycle extension [1][2]. Economic Indicators - The Fed rate cut is seen as a major catalyst that could extend the economic cycle, with expectations of further cuts to come [2]. - Earnings have been surprisingly strong, with expectations for continued performance in the upcoming quarter, driven by a long-term theme of expanding margins [2]. Market Trends - Technology, financials, and communication services are currently at record highs, indicating strong performance in these sectors [4]. - There is a debate on whether the market will rise primarily through tech or a broader range of sectors [5]. Investment Opportunities - Large-cap tech is expected to continue benefiting from valuation support and margin expansion, while small-cap stocks are also showing potential due to improved interest rate conditions and increased deal activity [6][7]. - The Russell 2000 index has seen a rise in returns this quarter, suggesting a positive trend for small-cap stocks [7]. Short-term Market Sentiment - There is a cautious sentiment in the short term due to concerns over stock valuations, which are considered high compared to historical levels [10]. - The market is in a holding pattern until the earnings season begins, with most current trends already priced in [11]. Economic Data and Fed Focus - Upcoming economic data, particularly regarding inflation and the job market, will influence expectations for Fed actions in their next meeting [12][13]. - The focus of the Fed appears to be shifting more towards the labor market, which could impact market dynamics [12].