Small caps may have had a slow start to the year, but the Russell 2000 set a record high earlier this week. Can the group continue to climb. Let's see what the chart master has to say.So, Carter, what do you say. >> My hunch is no, but let's get right to it. So, first, what do we know.There are 100 1,956 constituents in this index. The whole thing is valued at 3.43% trillion. Um, next slide.Guess what. That is less than Apple, as all will know. That's less than Nvidia. That's less than Microsoft.So, we're a ...

Federal Reserve Policy & Economic Outlook - The wide dispersion in views on the Federal Reserve's dot plot reflects confusion about the current state of the US economy, particularly regarding the labor market and the impact of tariffs [1][2][3] - The Federal Reserve's independence is considered tremendously important, and members are wary of appearing to be overly influenced by the administration [4][5] - The Phillips curve, which relates unemployment to wage inflation, is a key framework the Federal Reserve is using; concerns about a weakening labor market could lead to rate cuts despite inflation above 3% [6][7] - Seven members of the Federal Reserve indicated they foresee no more rate cuts this year, suggesting it may not be a proper easing cycle [32][35] Market Impact & Investment Strategies - Productivity is expected to move higher into 2026, already starting in 2025, which could support higher market multiples and is bullish for equity markets [9] - Small cap stocks, particularly the SML small cap 600 index (up 2%), tend to move at the later end of a rate cut cycle, suggesting potential opportunities in domestic American companies [10][11] - The 10-year yield remained stable at 4%, indicating the bond market has already priced in significant easing and mortgage relief may not be forthcoming [12][13] - Fiscal dominance is in play, meaning the long end of the curve (mortgages) is more sensitive to government actions (shutdown risks, budgets) than Federal Reserve actions [14][15] Uncertainties & Future Considerations - AI's impact on the labor market and the American economy is a significant uncertainty for the Federal Reserve [20][21][27][28] - A capex-driven cycle, fueled by approximately $500 billion investment in AI infrastructure, is underway, reminiscent of the 1990s [22] - Immigration levels and tariffs add to the uncertainty surrounding the economic outlook [28] - The strength and independence of the Federal Reserve as an institution are seen as positive for markets and could help hold down long-term rates [19][20][29]

Market Outlook & Trade - US-China trade relations and potential summits significantly impact market sentiment [1][2] - Resolution on issues like TikTok could boost market confidence [2] - Market seeks certainty to facilitate financial planning and cost estimation [2] Interest Rate & Monetary Policy - Market anticipates a 25 basis point (0.25%) rate cut, with potential for more [4] - Further rate cuts, especially reaching 200 basis points (2%), are expected to stimulate loan activity and capital expenditure (capex) [7][11] - The impact of rate cuts on smaller capitalization companies is expected to be more pronounced due to their reliance on short-term loans [5][6] Investment Strategy - The company is considering spreading investments across different capitalizations, particularly focusing on small and mid-cap companies [5] - Small and mid-cap stocks are viewed as potential beneficiaries of future rate cuts, especially as cuts approach 200 basis points (2%) [5][7][11] - Portfolio repositioning for 2026 is recommended in anticipation of further rate cuts [10] Capex & Company Growth - Capex is crucial for small and mid-cap companies, not just mega-cap tech [8][9] - Increased capex is expected to drive growth once significant rate cuts materialize [7]

Investment Rating - The report indicates a mixed sentiment with institutional clients being net sellers while private clients have shown net buying behavior [5][7][20]. Core Insights - The report highlights that small cap inflows have continued, with clients showing a preference for small cap stocks over mid caps, while large caps also saw some buying activity [9][25]. - Private clients have turned net sellers for the first time this year, with a rolling four-week average of equity flows turning negative [9][20]. - Institutional clients have been net buyers for six consecutive weeks, marking the longest streak since late 2022, while hedge funds have also shown buying activity [9][20]. - The report notes that corporate client buybacks have accelerated, surpassing typical seasonal levels for the first time in ten weeks [9]. Summary by Client Type - **Institutional Clients**: The largest net sellers post-crisis, with cumulative flows showing significant outflows [5][7]. - **Private Clients**: Have been the only cumulative net buyers year-to-date, but recent trends indicate a shift to net selling [9][20]. - **Hedge Funds**: Showed a buying trend for the second consecutive week, contrasting with the selling behavior of private clients [9][20]. Summary by Sector - **Technology, Consumer Services, and Staples**: These sectors saw the most buying activity from clients [9]. - **Industrials, Financials, and Utilities**: Experienced the largest outflows, with utilities facing near-record outflows in recent weeks [9][20]. - **Equity ETFs**: Clients favored growth ETFs over value ETFs for the first time in six weeks, indicating a shift in investment strategy [9]. Summary by Size Segment - **Small and Micro Caps**: Continued to attract inflows, while mid caps saw outflows [9][25]. - **Large Caps**: Also experienced buying activity, indicating a diversified interest across market capitalizations [9][25]. Summary by Investment Style - **Growth vs. Value**: Growth ETFs have seen greater net flows compared to value ETFs, suggesting a preference for growth-oriented investments [9].

Market Trends - Indian retail investors are still interested in small cap stocks and IPOs [1] - This is happening despite earnings headwinds [1]

Relative Performance - Small cap stocks are more sensitive to economic cycles and interest rate changes than large cap stocks [1] - Historically, small cap stocks have outperformed large caps by 2% to 3% annually, but have recently lagged due to high interest rates and economic uncertainty [1] Impact of Interest Rates - The Federal Reserve's high rate environment since 2022 has weighed heavily on small caps, which typically rely on borrowing to fuel growth [2] - Higher interest rates increase borrowing costs and compress valuations, hitting small cap profitability hard [2] - Rate cuts are bullish for small caps as these companies pay reduced interest expenses on debt [2] Economic Impact of Rate Cuts - Rate cuts tend to stimulate the domestic economy, which benefits small cap companies that rely on domestic demand [3] - Increased consumer spending and business investment, resulting from rate cuts, can disproportionately benefit small cap companies [3]

Group 1 - The article highlights that some of the most profitable small-cap companies are found in the Consumer Discretionary sector, which is characterized as risk-on and cyclical [1] - The Pacer US Small Cap Cash Cows 100 ETF (BATS: CALF) has a significant allocation to the Consumer Discretionary sector, indicating its importance in the small-cap investment landscape [1] Group 2 - The author emphasizes the importance of thematic investing and the analysis of stock market sectors, ETFs, and economic data to identify investment opportunities [1] - The narrative focuses on communicating financial data in an engaging and educational manner, utilizing empirical data and charts to support investment insights [1]

Investment Strategy - TS Lombard is positioning for the Jackson Hole meeting by adjusting views on US small-cap and large-cap stocks [1] - The report suggests adjustments to views on the Japanese Yen (JPY), Swiss Franc (CHF), and Australian Dollar (AUD) assets [1]

All right, so I want to start off. What do you make of what we're seeing in the futures. Futures lower across the board as we await for uh JPAL over at Jackson Hole.What's your take on just the market sentiment right now. I >> I think you hit the nail on the head that that we've had a powerful 34% rally in the S&P over the last 4 and 1/2 months on the basis of the fact that first quarter, second quarter revenues and earnings much stronger than expected and an expectation that the Fed's going to start cuttin ...

Market Analysis of Small Caps - Small caps experienced a surge following a better-than-expected CPI report, similar to the situation 13 months prior in July 2024, when a September rate cut was priced in [2][3] - The sustainability of the small caps breakout is questionable, resembling momentum unwinds seen in July and post-election periods [4] - The Russell 2000 index is at 2300 and change, with a 52-week high of 2466, suggesting potential upside but caution is advised due to past false breakouts [5] - The current setup for small caps may not be significantly different from previous instances, warranting a tight stop-loss strategy [6] Healthcare Sector Insights - Healthcare sector is down 4% since the end of 2022, while the S&P 500 is up approximately 65%, indicating a substantial performance gap [6] - Biotech, a significant component of healthcare and small caps, is showing signs of recovery by clearing its 200-day moving average [7] - Healthcare is viewed as a potentially good contrarian trade, possibly offering more compelling opportunities than small caps in general [7]