Market Overview - September has shown a surprisingly positive market performance despite initial bearish expectations, with the S&P down only an average of 0.5% [2] - Concerns about market overvaluation primarily focus on the MAG 7 stocks, which constitute 40% of the S&P 500, while small caps are projected to have 35% earnings growth next year at a valuation of 17 times earnings [3][4] Investment Opportunities - Small caps are highlighted as having the lowest multiples and highest earnings growth potential, making them attractive for investment [5][6] - The energy sector is also seen as undervalued, trading at 15.2 times earnings, with significant growth opportunities in natural gas, particularly as data center demand is expected to grow by 165% by 2030 [6][7] Company Insights - Alibaba is planning to increase its AI spending significantly, with projections for global investment in AI reaching $4 trillion over the next five years, positioning it as a leading player in the AI space [10][11] - Intel is viewed as a potential multi-bagger due to its strategic importance in the semiconductor supply chain, especially with the backing from the U.S. government and partnerships with companies like Nvidia [14][15] Consumer Sentiment and Economic Outlook - Despite low consumer sentiment, historical trends suggest that the S&P 500 tends to rise by an average of 24.1% within 12 months after such lows [21] - The housing market, which constitutes 16% of GDP, is expected to recover as interest rates decrease, allowing consumers to access trapped equity and stimulate economic activity [22][23]

Market Trends - Speculation on which small-cap altcoin has the potential for significant growth [1] - Focus on identifying the next altcoin with explosive growth potential [1]

Market Valuation & Risk - Market valuations are stretched, with the S&P 500 trading at high multiples, indicating investors are paying a premium to enter the market [2] - The S&P 500 index has become top-heavy, heavily influenced by a handful of companies, posing a risk if one of these companies falters [2] Small Cap Opportunities - Equal-weight S&P and small caps are showing signs of outperforming cap-weighted indexes, with the Russell 2000 rallying 9% in August and experiencing its seventh straight weekly gain, the longest rally in 5 years [3] - Small caps have been left behind for years and were significantly impacted during COVID, but lower rates can improve their bottom line due to their higher floating rate debt [5] - Small caps are trading at a discount to large caps, making them attractive as money rotates into new leadership, with falling rates creating a setup for a catch-up trade [6] - IGR, the iShares Core S&P Small-Cap ETF, focuses on profitable companies in the small-cap space [7] Asset Allocation & Investment Strategy - Asset allocation is key, and investments should be tied to the client's overall risk profile [8] - Clients should consider extending their duration to capture higher yields and potential principal appreciation [9] - Over 6 trillion USD is sitting in money market funds, with over 1 trillion USD entering in the past year alone, and as rates come down, investors need to consider where to shift this risk-free yield [9] - Money market funds are at 15% relative to the S&P 500, which is historically about 20% [11]

Market Analysis & Trends - The market experienced mixed results following the Fed rate cut, with indices closing lower on the day of the cut, except for the Russell [1] - There's an ongoing debate about whether the recent moves in the Russell 2000 are a catch-up play, given the outperformance of other major indices this year [4] - The market's high valuations are considered more palatable in a rate-cutting environment, although current levels are near historic highs [8] - The market is in a precarious position but supported by tailwinds like the AI revolution and potential policy alignment [10] Small Cap Stocks - Small cap companies are more sensitive to changes in Federal Reserve policy due to their reliance on short-term rates [5] - Small cap value stocks are estimated to trade at a 15% to 20% discount to their intrinsic value, with Fed easing potentially serving as a catalyst for convergence [6] - Small caps are viewed as a procyclical trade consistent with a bullish market mood [13] Investment Strategies & Sector Outlook - Healthcare is considered a defensive sector that has lagged behind despite strong fundamentals, making it an attractive investment [13][14] - Gold is currently considered expensive, with differing opinions on whether to buy, despite some price targets suggesting it could reach $4,000 [15] - Dollar cost averaging and buying the dip are recommended strategies in the current market environment [11]

Market Trends & Economic Outlook - The market may see a similar situation to a year ago with potential for rising inflation and two-year Treasury yields around 35%, possibly moving higher [1] - Economic growth alongside rising inflation isn't necessarily negative [1] - Small caps are potentially underowned, with futures short on Russell, suggesting lower rates could benefit them [1] Investment Strategies & Portfolio Allocation - The firm suggests not being long bonds and considering a lower bond allocation, with alternatives like gold for balance [1] - Diversification is crucial, with potential opportunities in international markets (e g, China) and small caps [1] - Consider diversifying from the "Magnificent Seven" (Mag 7) due to their concentrated exposure [1] Individual Stock Picks & Sector Focus - Axon, a maker of body cams and tasers, is highlighted as a potentially good investment with 30% type growth [1] - AI is a significant theme for the next 3-5 years, but diversification beyond chip manufacturers is recommended, including data centers, cooling systems, and energy companies [1][2] Valuation & Risk Management - Overconcentration in a few AI chip names carries significant risk [2] - The traditional valuation game may not always work, as seen with Nvidia and Broadcom, where earnings eventually justified high valuations [1] - Stocks hitting highs often continue to make new highs, while stocks hitting lows can potentially go to zero [1]

Market Outlook & Investment Strategy - Goldman Sachs encourages clients to stay invested and deploy incremental capital over 6-18 months, anticipating potential drawdowns [2] - The market has an 80% probability of experiencing a 10% drawdown, but valuations are not always reliable predictors of market performance [3] - Family offices are looking to decrease cash holdings by 30% over the next 12 months, shifting towards public and private equities [5] - There is significant "right tail risk" in the market, suggesting potential for further upside [7] Economic Factors & Fed Policy - $73 trillion is sitting in money market funds, which could move into risk assets as rates decline [8] - The Fed anticipates a slowdown followed by reacceleration, driven by fiscal and monetary stimulus, and a weaker dollar [9] - Fiscal stimulus is expected to increase cash flow for consumers and corporations [10] AI & Earnings - AI capex has doubled in the last two years, from $150 billion to $300 billion, but remains at 50% of cash flows, unlike the tech bubble [12][13] - The top five stocks have a return on equity (ROE) of 65% and grew over 20% in the first half of the year [14] - The market is more driven by earnings than the overall economy [16] Market Positioning & Sentiment - Client sentiment is mixed, with wealth management clients being neutral to risk-on [4] - Hedge funds are at the 40th percentile of net long positioning, and mutual funds are holding $170 billion in cash, indicating relatively light positioning [6] - The market is expected to hover around current levels until the end of the year, with a moderate upward trend in 2026 [17] Small Caps vs Large/Mid Caps - Small caps have been performing well, but last year the S&P outperformed small caps despite rate cuts and GDP growth [18][19] - Goldman Sachs prefers large and mid-cap stocks [19]

Market Outlook & Strategy - Wells Fargo raised its year-end S&P target to between 6600 and 6800, while anticipating increased volatility [1] - The market has largely priced in the Fed's rate cuts and a relatively stable economy, leaving limited room for further capitalization on this dynamic in the near term [2] - Wells Fargo believes 2026 could be an even better year, given the resolution of fiscal policy and the potential continuation of accommodative monetary policy [3] - The market indicates positive momentum for the remainder of the year and into the next, supporting a bullish outlook [6] Sector Allocation - Wells Fargo is underweight on small-cap stocks, despite their recent outperformance, citing quality degradation and the prevalence of non-earners in the small-cap universe [10] - The idea of rotating from tech to small caps is considered nonsensical, especially given the significant market capitalization difference ($3 trillion vs $28 trillion) [8][9] Economic Indicators - Corporate balance sheets are in a strong position, with high yield spreads at fresh lows [4] - Banks are at all-time highs despite the Fed cutting interest rates, indicating no significant concerns about credit quality or defaults [5]

Market Trend & Strategy - The market suggests the Federal Reserve (Fed) will implement approximately 1 and 3/4 more rate cuts before the end of the year, making it difficult to bet against the Fed's actions [1] - The old investment playbook of aligning with the Fed's actions remains effective [2] - Small caps and financials are identified as key sectors to watch, with potential opportunities in home builders [3] - The Russell 2000 is potentially reaching its first all-time high close since November 8th, 2021, marking a significant consolidation period [3][4] - A possible chase for performance is setting up, with a pivot towards sectors that have underperformed relatively [9] Financial Sector Analysis - Financials are trading without multiple expansion, presenting an opportunity as the sector's PE multiple remains at January levels [6] - The financial sector benefits from investor engagement, increased M&A activity, and regulatory relief [12] - Major banks like Citigroup, Goldman Sachs, Morgan Stanley, Bank of America, and JP Morgan are at 52-week or record highs [13] - Rate cuts without a recession are expected to drive a continued rally in bank stocks, influencing price target increases [14] Investment Considerations & Risks - Some argue against investing in banks outside the top six, citing the private credit market's encroachment on commercial lending and its sensitivity to net interest margin [15] - The big three (JP Morgan, Goldman Sachs, and Morgan Stanley) are favored due to their revenue streams from deal premiums, M&A transactions, and wealth management, making them less sensitive to interest rate moves [15][16] - Fintech companies, like SoFi, are seen as having significant upside potential due to their banking-as-a-service technology, which is less interest rate sensitive [19][20]

Well, stocks do typically perform better in the wake of cuts from the Federal Reserve. My next guest has a playbook for how ETF investors can potentially take advantage of any postcut bump. Marissa Anel, Goldman Sachs Asset Management, head of ETF investment strategies, joining me uh now on set for this week's ETF report brought to you by Invesco QQQ.Marissa, thanks for being here. >> Thanks for having me. >> So, I I guess first of all to set the table, we should talk about what the Fed is going to do today ...

Core Viewpoint - A new trend has emerged in the market with small-cap stocks outperforming larger counterparts, indicating a shift in investor appetite towards riskier investments [1][2]. Market Performance - Since August 11th, the Russell 2000 index has gained 8.1%, outperforming the Dow Jones (4.2%), Nasdaq Composite (3.5%), and S&P 500 (3.3%) [3]. - The Russell 2000 has historically been viewed as a bullish economic indicator, as smaller companies are generally more vulnerable during economic downturns [5]. Participation and Trends - The rally in small caps has seen broad participation, with over 150 stocks in the Russell 2000 rising by 25% or more in the past 30 days [6]. - Despite recent gains, the Russell 2000 has lagged behind large-cap peers on a year-to-date and multi-year basis [8]. Economic Context - Recent economic indicators, including weak job data and inflation signs, have led to increased hopes for rate cuts, encouraging investors to take risks on small-cap stocks [2][9]. Notable Small-Cap Performers - Mineralys Therapeutics has seen a 140% increase in shares, with a market value of over $2.6 billion, driven by insider buying and positive earnings [12]. - Vita Coco's shares rose 22% in the past month and 47% over the past year, with a market cap of $2.3 billion, following strong sales growth [13]. - Oklo Inc has gained 21% in the past month and 1300% over the past year, with a market value of $12.8 billion, supported by improved earnings and new project awards [14]. Sector Insights - Many leading small-cap stocks are in the technology sector, benefiting from trends related to the AI revolution [15].