Weekly Market Update: July 22, 2024
07/22/24
Shifting Outlook May Lead to Equity Market Rotation
Equities are at a crossroads. The Russell 2000 Index, a benchmark for small cap stocks, rose 10% in four trading days following the June CPI report that came in below expectations and solidified market expectations for a September rate cut. Over that same timeframe the S&P 500 gained 1%, an index tracking the so called “Magnificent 7” stocks fell 4%, and market darling Nvidia fell almost 7%. This price action reflects rotation out of a heavily crowded trade. As we have discussed, market breadth is near historic lows as a small number of stocks are driving index performance. The recent outperformance of small caps and other underperformers may signal the beginning of broader participation, however it remains to be seen if this trend will continue following a reversal to end the week.
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