Group 1 - Investors expect the Federal Reserve to lower interest rates two more times in 2023, targeting a federal funds rate of 3% to 3.25% by September [1] - A prominent billionaire investor believes the market is underestimating the Fed's potential for more than two rate cuts this year [2] - The selection of Kevin Warsh as the new Fed Chair has relieved market concerns about potential aggressive rate cuts to please the President [5] Group 2 - Kevin Warsh has a notable background in finance, having worked with Stanley Druckenmiller and served on the Federal Reserve's Board of Governors [6] - Investor David Einhorn anticipates that Warsh will advocate for rate cuts even in a strong economy, unless inflation reaches 4% or 5% [7] - Historically, Warsh has been more concerned about inflation than labor market conditions, which may influence his stance on rate cuts given current inflation levels above the Fed's 2% target [8]

With Bitcoin (CRYPTO: BTC) currently trading for less than $70,000, it might seem inconceivable that it could more than double in value to hit a price of $150,000 this year. Yet, that's exactly what some top Wall Street firms are now predicting. So what are some of the catalysts that could send Bitcoin soaring this year? Let's take a closer look. Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the ...

By Howard Schneider WASHINGTON, Feb 17 (Reuters) - The U.S. Federal Reserve could approve "several more" interest rate cuts this year if inflation resumes a decline to the central bank's 2% target, Chicago Fed President Austan Goolsbee said on Tuesday, downplaying ‌a recent weak consumer price report as masking strong service price increases. Consumer price inflation for January was a cooler-than-expected 2.4%, ‌but Goolsbee said he partly discounted that result because it was influenced by high inflat ...

The dollar index (DXY00) today is up by +0.55% at a 1-week high.  Today's slide in stocks has boosted some liquidity demand for the dollar.  Also, weakness in the euro and the British pound is bullish for the dollar after the currencies fell to 1-week lows.  Today's US economic news was mixed for the dollar, and the decline in T-note yields is negative for the dollar. The US Feb Empire manufacturing general business conditions survey fell -0.6 to 7.1, a smaller decline than expectations of 6.2. More New ...

Valuation and Performance - Since the start of 2021, the S&P 500 gained more than 63%, while the Russell 2000 rose just 18%, leading to historically low small-cap valuations [1] - The Russell 2000 trades at roughly 16x forward earnings, compared to about 21x for the S&P 500, indicating a significant valuation gap that is attracting institutional attention [1] Economic Sensitivity and Future Outlook - Small caps are more sensitive to interest rates and domestic economic conditions than large-cap multinationals, with expectations of Federal Reserve rate cuts in 2026 potentially improving financing conditions for smaller companies [2] - Historically, small caps tend to outperform early in economic expansions, with the Russell 2000 outperforming the S&P 500 by an average of 12 percentage points in the first 12 months following the Fed's last five rate-cutting cycles [3] Institutional Positioning - Fund managers remain structurally underweight small caps, with allocations to U.S. small caps still below long-term averages, reflecting caution after years of mega-cap tech dominance [4] - This underweight positioning creates asymmetry, as capital rotation into small caps tends to occur quickly due to lower ownership levels [4] Market Signals - Small caps are often one of the earliest signals that capital is shifting, indicating the beginning of a new market leadership cycle [5]

Core Viewpoint - The iShares Russell 2000 ETF (IWM) has outperformed the S&P 500 in 2026, gaining 6.8% year-to-date compared to a 0.1% decline in the S&P 500, and achieving a 17.6% return over the past year versus the S&P 500's 14.9% [1] Performance Comparison - The iShares Russell 2000 ETF has shown a significant performance advantage over the S&P 500, with a year-to-date gain of 6.8% and a one-year return of 17.6% compared to the S&P 500's 0.1% decline and 14.9% gain respectively [1] - The Russell 2000 Index, which the iShares ETF tracks, returned only 2.2% annually from 2020 to 2024, while the S&P 500 averaged 15.1% during the same period [1] Economic Context - Small-cap stocks, represented by the Russell 2000, faced challenges during the pandemic, including higher debt loads and inflation pressures, which led to underperformance compared to large caps [1] - The Federal Reserve's rate cuts in 2025, reducing the federal funds rate to 3.50%-3.75%, provided relief to small businesses, allowing for a rebound in earnings, which grew by 12% in late 2025 [1] Investment Characteristics - The iShares Russell 2000 ETF manages $76.2 billion in assets and has an expense ratio of 0.19%, making it a cost-effective option for investors seeking exposure to small-cap stocks [1] - The ETF's holdings are diversified across sectors such as industrials (19%), financials (17%), and healthcare (17%), with no single stock exceeding 1% of assets [1] Future Outlook - Economists project that the Federal Reserve may implement two to three more rate cuts in 2026, potentially lowering rates to 2.75%-3.00%, which could further benefit small-cap stocks [1] - Historically, small-cap stocks have outperformed large caps over long periods, delivering a 2% to 3% annual premium since 1926, except during periods of high interest rates [1]

Goldman Sachs just sent a sobering warning to the Federal Reserve. After analyzing a "noisy" January CPI report, the firm’s economists, led by Jan Hatzius, officially reset their forecast for the Fed's favorite inflation gauge. The new target? A 3.05% year-over-year jump in core PCE. This isn't just a routine revision—it’s a brutal reality check for investors betting on a pivot. If Goldman is right, the "last mile" of the inflation fight is getting longer, and the window for interest rate cuts in the fir ...

Market Performance - The U.S. stock market is experiencing volatility with the Dow Jones Industrial Average (DJI) trading near 49,451.98, down approximately 1.34% on the day, while the S&P 500 (SPY) is at 6,832.76, down 1.57%, and the Nasdaq Composite (IXIC) has fallen 2.03% to 22,597.15 [2][3] Economic Indicators - The January Consumer Price Index (CPI) report showed a headline inflation increase of just 0.2%, below the consensus estimate of 0.3%, with a year-over-year CPI rise of 2.4%, the lowest since mid-2024 [3][8] Corporate Developments - Rivian Automotive (RIVN) shares surged over 20% after reporting a narrower-than-expected fourth-quarter loss and projecting vehicle delivery growth of 47% to 59% for the 2026 fiscal year [4] - Airbnb (ABNB) climbed over 5% due to quarterly revenue exceeding Wall Street expectations, driven by strong international demand [5] - Arista Networks (ANET) saw a 10% increase following a robust fourth-quarter report highlighting surging gross margins [5] - DraftKings (DKNG) plummeted more than 17% despite topping revenue and earnings estimates, as its full-year guidance fell significantly below analyst projections [6] - Major tech companies like Microsoft (MSFT), Nvidia (NVDA), and Google (GOOGL) are under pressure due to concerns over AI-driven labor substitution impacting corporate spending [6] Upcoming Events - U.S. markets will be closed on February 16th for Presidents' Day, with the focus shifting to the December Personal Consumption Expenditures (PCE) price index upon resumption of trading [7][8] - The upcoming PCE data is expected to influence the Federal Reserve's policy decisions, with economists suggesting that the CPI reading may lead to considerations for interest rate cuts later this year [8]

Market Overview - US stocks experienced a significant decline, with the Dow Jones Industrial Average falling approximately 1.3% (over 650 points), the S&P 500 dropping 1.6%, and the Nasdaq Composite decreasing by over 2% as investors reacted to fears of AI-driven disruption in technology shares [2][4] - Gold futures decreased by 3%, and Bitcoin's value fell to around $65,000 as investors adopted a risk-off approach [2] Sector Impact - The recent sell-off in software stocks has led investors to identify sectors vulnerable to AI disruption, with trucking, logistics, and real estate services stocks being notably affected [3] - Cisco Systems saw its stock decline over 12% due to a pessimistic profit outlook despite an increase in sales, while other major tech companies like Nvidia, Meta, Amazon, and Apple also experienced significant losses, with Apple dropping around 5% [4] Economic Indicators - The weekly jobless claims report indicated a smaller decline than expected, following a strong nonfarm payrolls report that showed the US economy added twice as many jobs as anticipated in January, complicating expectations for Federal Reserve policy [5] - The upcoming Consumer Price Index report is anticipated, with a softer reading potentially easing inflation concerns while maintaining economic growth [4] Earnings Reports - McDonald's shares increased after the company reported earnings that exceeded expectations [6] - Upcoming earnings reports from Coinbase, Applied Materials, and Rivian are expected to be significant, with all three scheduled to be released after market close [6]

Group 1 - The job market is showing signs of stability with employers adding 130,000 jobs in January, which surprised economists [3] - Federal Reserve officials are focused on elevated inflation, with annual price increases at 2.7%, above the Fed's target [3][4] - Kansas City Fed President Jeffrey Schmid emphasized the importance of maintaining focus on the inflation objective to avoid long-term inflation being stuck closer to 3% [4] Group 2 - Fed Governor Stephen Miran believes there is still room to cut interest rates despite a strong job market, advocating for fewer regulatory burdens to lower prices [5][6] - Central bankers, including Schmid and Dallas Fed President Lorie Logan, suggest keeping interest rates at current levels while monitoring inflation [8][9] - The debate continues regarding the impact of tariffs on inflation, with officials uncertain about their influence on price increases [9]