Nasdaq 100 Drops More Than 1% as Bond Yields Surge

Monetary Policy & Interest Rates - The market anticipated the rate cut, and the Fed did not deviate from expectations, avoiding promises of a future glide path [1] - Dissenting opinions within the FOMC are viewed positively, potentially reinforcing the Fed's independence and highlighting the committee's diverse perspectives [2] - The market anticipates a new Fed chair in May 2026, raising questions about the future interest rate landscape and the potential for more than one rate cut [3] - The Fed's reaction function is expected to remain heavily reliant on labor market data, potentially leading to more rate cuts than currently priced in if the labor market deteriorates significantly [5][6] Earnings & Market Performance - The broadening market performance over the past six months is attributed to the trajectory of earnings among different cohorts [7] - Earnings growth deceleration in mega-cap tech companies is converging with accelerating earnings growth in the rest of the market, supporting market broadening [8][9] - Despite frothy valuations, value can be found beneath the surface due to significant churn and rotation within the market [10][11][12] - A GARP (Growth at a Reasonable Price) approach is recommended, focusing on both value and growth factors [12] Investment Strategies - Within the Russell 2000, fading the lower quality, unprofitable components and leaning into the profitable components with better fundamentals is advised [13] - A combination of value factors (price-to-book, price-to-sales, strong balance sheets, high interest coverage) and growth factors (positive earnings trends, forward revisions, exceeding earnings expectations) is recommended [14]