Core Viewpoint - Investors are anticipating a potential cut in the federal-funds rate by the Federal Open Market Committee, which may act as a catalyst for small-cap U.S. companies, particularly due to their focus on domestic sales and the potential for reduced borrowing costs [1]. Group 1: Market Performance - Small-cap stocks have underperformed compared to large-cap stocks this year and over the past five years, but the situation may change with expected interest rate cuts [1]. - The S&P 500 has outperformed the S&P Small Cap 600 over the past five years, although the small-cap index led for a significant portion of that period [5]. Group 2: Investor Sentiment - Jay Woods, chief global strategist at Freedom Capital Markets, suggests that excessive volatility may follow the Federal Reserve Chair's press conference, but any potential selloff in small-caps could lead to a rally later in the year [2]. - Momentum in the Russell 2000 index could indicate a stronger bull market than anticipated if it breaks out to new highs [2]. Group 3: Index Criteria and Screening - The S&P Small Cap 600 requires companies to show four consecutive quarters of profitability for initial inclusion, making it a more conservative benchmark compared to the Russell 2000 [5]. - A screening of the S&P Small Cap 600 highlights companies with rapid revenue growth and those expected to grow quickly through 2027 [4].

Market Overview - The S&P 500 Index (SPX) has not reached a new all-time intraday high for six consecutive days, marking its longest streak without a new high since mid-June, closing just 0.32 points below last month's all-time closing high of 6,389.77 [1] - The SPX advanced above the previous all-time high of 6,427 last week, but selling at new highs is not recommended due to the frequency of such occurrences since the late-June breakout [4] - The SPX is currently pausing around the 10% above 2024 close level of 6,469, indicating a potential pause rather than a major pivot [5] Inflation and Market Reaction - The Producer Price Index (PPI) showed a significant increase of 0.9% in July, compared to the forecast of 0.2%, which could have triggered major selling, but the market reacted neutrally [6] - The lack of selling pressure may be due to hedge fund managers exiting positions in response to tariffs and inflation concerns, while active fund managers reduced equity exposure leading up to the PPI release [7] Sentiment and Technical Indicators - Market sentiment is cautious, with the percentage of bullish investors in the American Association of Individual Investors (AAII) falling below 30% for the first time since early May, which historically has been a buying opportunity [7] - The 30-day moving average is a key technical indicator, currently projected to be around 6,365 by week's end, and serves as a potential guide for identifying cracks in the current uptrend [12]