Market Trends & Investment Opportunities - The report suggests that breaking through \$120,000 in Bitcoin and \$4,000 in Ethereum could lead to rapid market movement [1][7] - The administration is considering eliminating capital gains tax on housing to stimulate the housing market by unlocking transactions and enabling people to sell homes [1] - Re-industrialization is occurring, driven by AI embodiment, requiring hardware, data centers, and power, shifting focus from software to energy, materials, and mining [2] - The US grid system is under strain due to the energy demands of AI data centers, leading to skyrocketing megawatt per day pricing and a shortage of data center space [2] - The report highlights a potential shift in market leadership from the MAG7 to a broader range of companies in the energy, materials, and mining sectors due to re-industrialization and AI [2][17] - Bitcoin is catching up to gold in performance, and the report suggests that Bitcoin relative to the S&P 500 and especially the MAG7 is the most important chart for the rest of the year [7] Economic Factors & Policy - The Fed's independence is questioned due to fiscal dominance, with a massive debt situation and a deficit of 6% to 7% requiring lower interest rates to manage interest expense [4] - The report suggests that the Fed may need to focus on the debt and deficit problem, potentially changing its views on monetary policy [5] - The report mentions that the market isn't expecting a rate cut at the next meeting, so a cut would be a massive surprise [5] Labor Market & Automation - There is a massive shortage of labor in energy, physical world, manufacturing, and blue-collar companies, suggesting robotics may fill the gap rather than displace workers [3] - The report indicates a need for 500,000 workers solely for the power side of the electricity grid [2] Retail Investor Influence - The report emphasizes the growing influence of retail investors, with meme-driven investments and a shift in market dynamics [7][8][9]

Core Viewpoint - Small-cap stocks are experiencing significant growth, with the Russell 2000 Index rising nearly 9% in July 2025, outperforming larger indices like the S&P 500 and Nasdaq Composite [1] Group 1: Market Dynamics - Renewed expectations for Federal Reserve rate cuts due to cooling inflation and a slowing job market are driving small-cap stock performance, as lower rates reduce borrowing costs for these companies [3] - Small-cap stocks are trading at a substantial discount of approximately 55% compared to large-cap stocks based on P/E ratios, prompting institutional investors to shift their focus towards under-owned small-cap areas [4] - A rebound is observed in small-cap companies within the financials, industrials, and consumer discretionary sectors, which collectively represent over 50% of the Russell 2000, particularly benefiting regional banks and manufacturing stocks [5] Group 2: M&A Activity and Investor Sentiment - Increased M&A activity is noted among small and mid-sized firms in healthcare, biotech, and tech services, as large-cap companies seek growth through acquisitions, making small-caps attractive targets [6] - Retail investors are returning to small-cap stocks as recession fears diminish, with trading volumes in small-cap names and ETFs rising due to social media influence and AI-driven trading strategies [7] Group 3: Leading ETFs - Avantis U.S. Small Cap Equity ETF (AVSC) has increased by 10.1%, focusing on a diverse group of 1,287 small-cap stocks, with $1.7 billion in assets under management [9] - Invesco S&P SmallCap Value with Momentum ETF (XSVM) is up 9.5%, tracking high momentum value stocks with a focus on financials, holding 122 stocks and $574.1 million in assets [10] - JPMorgan BetaBuilders U.S. Small Cap Equity ETF (BBSC) has risen by 9.4%, providing exposure to 749 small-cap stocks with $566.5 million in assets [11] - iShares US Small Cap Value Factor ETF (SVAL) is up 9%, focusing on 250 small-cap companies with a significant portion in financials, holding $140.8 million in assets [12] - WisdomTree U.S. SmallCap Fund (EES) has increased by 8.7%, targeting 901 small-cap companies with $606.9 million in assets [13]