Joining me now is Craig Johnson, chief market technician at Piper Sandler. Craig, this is different from an earlier guest who was sticking with the bigger name. So, what convinces you exactly about the small caps.>> John, thanks for having me on this afternoon. What convinces me about these small and midcap names is when we go back and just sort of look at the advance we've seen off the lows and we start looking at these mag seven stocks that have just been kind of treading water in here. John, we've been c ...

Your next guest says a new record could be coming. Tim Orbanowitz is chief investment strategist at Innovator Capital Management. Tim, good to have you on set. >> Great to be with you, Brian. >> Man, we've been waiting for the small cap breakout for a long time. Hasn't It's happened a little bit, but we're still not at a record high. Should we be bullish? >> I think there are catalysts, Brian. And and if you look at this and take a step back, we we've had this valuation gap, small caps to large caps, for a ...

Nvidia's Market Impact - Nvidia accounts for approximately 8% of the SPY (S&P 500), around 10% of the NASDAQ 100, and over 22% of the SMH [1] - The market anticipates Nvidia to surpass both top and bottom-line expectations, with focus on their future guidance, particularly regarding China and data center growth [2] Market Broadening and Sector Rotation - The market has shown broadening, with previously underperforming sectors experiencing gains, such as healthcare [3] - Lower interest rates are expected to benefit sectors that have been under pressure, including small-cap companies [3] Liquidity and Investor Sentiment - Approximately $7 trillion is held in US money market funds, a rise from $4 trillion in recent years, suggesting potential capital inflow into big cap tech if Nvidia performs well [4] - BFA's flow show indicated that clients sold stocks in nine out of eleven sectors, led by tech, staples, and financials, with hedge funds being the largest equity sellers [5] Small Caps and Rate Cuts - Small caps are more highly leveraged than larger cap companies, making them particularly sensitive to interest rate changes [9] - Small caps could benefit significantly if a recession is avoided and a couple of rate cuts occur, as they are currently considered cheap [9] Investment Strategy - The company favors big cap tech overall, citing strong earnings power, and advises against reducing tech exposure before Nvidia's earnings [11]

Small caps outperforming the market after Fed chair Powell's dovish speech on Friday. The Russell 2000 also besting the S&P over the past month and the entire third quarter, too. So, is this the breakout investors have been waiting for in small caps.Let's bring in Jill Carrie Hall from Bank of America. Jill, does this have legs here or is it just based on hopes of a rate cut sooner than later. Right.That's the the big question investors have been asking and we had been cautious on small caps for a while. Bu ...

Never's a long time. Let me expand the conversation. We'll bring in Charles Schwab's Kevin Gordon.He's with us here at Post 9 and Truist Keith Learn is joining us as well. It's great to see you both. That's a good segue, Keith, to go to you because that is one of your principal picks, the small caps, which you upgraded.That's right. Well, great to be with you. I've been listening to the conversation.I actually agree with a lot of it. I mean, we we're still bullish on tech. We're still bullish on lab large c ...

Market Outlook & Strategy - RBC Capital Markets is cautious heading into the fall due to prior valuation ceilings and seasonal weakness [2] - The summer rally made sense, but current levels are bumping against prior valuation ceilings, especially for S&P 500 and NASDAQ 100 [1][2] - September has been down in the stock market for four of the last five years, and October has also been challenging [2] Rate Cut Impact & Sector Analysis - The market reacted to the possibility of a rate cut, but the extent to which it's fully priced in is debatable [3][4] - Small caps rose about 39% on Friday, driven by hedge fund rate cut bets and net short positioning [5] - Financials are favored due to the potential for a healthy economy with a few rate cuts, reasonable valuations, and strong tariff risk management [8] Sentiment & Market Dynamics - Market sentiment is mixed, with some seeing tech as oversold and others remaining nervous [15][16] - AI is sinking in August, with 14% more bears than bulls, a trend last seen in Q1 of this year [16] - Institutional hedge fund positioning is one standard deviation above the long-term average, signaling potential but not extreme risk [17][18] Key Stocks & Economic Factors - Nvidia's reporting is a significant sentiment indicator, representing 8% of the S&P 500 [10] - The tug-of-war between growth and value continues, with growth outperforming value and top 10 market cap names hitting new highs relative to the rest of the market [12] - Tariff-sensitive sectors saw margin forecasts decline for Q2 and Q3, while tech was the only sector with increased margin forecasts [14]

Market Expectations & Rate Cuts - Market anticipates potential rate cuts, influencing stock market trends [1] - Rate cut hopes drive market leadership, especially in economically cyclical sectors [2] - Two-year yield at 375%, suggesting a modest easing cycle is probable [8] - Market implies the Fed may implement a 25 basis points cut in September [9] Sector Rotation & Performance - Homebuilders, biotech, and small caps show signs of revival, indicating a rotation from mega-cap stocks [2] - Homebuilders began to show trend changes 3-4 months prior to the report [3] - Global autos, including Toyota and GM, demonstrate resilience despite challenging macro conditions [4] - Small cap industrials and healthcare sectors are performing strongly [7] Economic Outlook & Curve Steepening - A steeper yield curve suggests a positive economic outlook [7] - The economy is considered to be in decent hands [7] - Homebuilding stocks, previously in a bear market with declines of 40-50%, may be recovering [10]

Interest Rate Cut Expectations and Market Impact - Treasury Secretary suggests the Fed should cut rates by 50 basis points next month, with an ultimate reduction of 150 to 175 basis points [1] - Small cap Russell 2000 saw the biggest gains, indicating potential rebound in out-of-favor groups and sectors if rates drop [2] - Market had previously priced in six rate cuts for 2025, but the S&P was significantly lower at that time [3] - Lower rates could benefit commercial real estate, which has been hurt by higher rates [6] - Lower rates lead to higher multiples and stock prices due to discounted cash flow [6] Labor Market and Economic Growth - Treasury Secretary's reasons for rate cuts include a softening job market [3] - There's a contradiction in the administration's stance on the job market revisions [4] - Unemployment is at 42%, higher than last year's below 4% [10] - GDP growth in the first half of 2024 was approximately 125% [10] - Tariffs of 15% or 30% on imports, especially from China, could weigh on growth [11] Investment Strategies - Equities are expected to continue to rally in a 150 basis point cut environment [14] - A barbell strategy is suggested, focusing on high multiple tech stocks and value stocks [14] - Financials and healthcare sectors are identified as potential areas for investment [15]

Investment Strategy - Piper Sandler focuses on stocks outside the tech sector with similar attributes, such as high earnings growth, profitability, and strong balance sheets [2] - The recipe for outperformance lies in companies with strong fundamentals, applicable across market caps [2] - Diversification is key, rather than concentrating investments in a few mega-cap stocks [6] - Investing in the most profitable names across all 11 sectors has outperformed the tech sector in recent years [5] Tech Sector Analysis - The tech sector offers multiple avenues for outperformance [5] - Discrepancies exist in performance among different groups within tech, such as software and semiconductors [3] - The distinction between hardware and software remains relevant, especially concerning AI disruption [4] Macroeconomic Factors - Scale provides companies with advantages like better access to capital and cost management [8] - Small caps have recently outperformed due to market pricing in interest rate cuts [8] - Small cap sales estimates are still falling, suggesting the outperformance is not due to a broad macro pickup [9]

Inflation and Economic Growth - The data suggests that inflation is not a major concern, with the bigger problem being a lack of real growth [2] - Real GDP growth in the first half of the year is slightly less than 1% annualized, and job creation is up 60 basis points annualized [3] - Current inflation is running at 2.5% to 3% [3] Federal Reserve (Fed) Policy - A Fed rate cut is anticipated, with the expectation that the Fed will choose to ease next month [3] - The market has been narrow in this bull market because the Fed has been tightening [7] - If the Fed cuts the funds rate, long-term bond yields and mortgage rates could decrease, the dollar could weaken, and the money supply could increase, all of which are positive for stocks and the economy [9] - A Fed rate cut could be a game-changer, potentially initiating a new bull market [10] Market Outlook and Investment Strategies - Small caps and midcaps offer a very attractive relative PE discount, trading at more than 30% discounts to their average 20-year relative PE with the S&P 500 [12][13] - Historically, 12 months after the Fed starts cutting interest rates, large caps gain less than 4%, while small caps are up about 3%, indicating significant room for small caps to move [13] - If the Fed eases, leadership may broaden out to small caps, international value plays [11]