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Last week, the stock market experienced a correction as the tech sector continued to struggle. As we look ahead, the 2024 presidential race may influence market sentiment, but historically, it has had minimal impact on stock performance. In this article, we will explore the key factors that will determine the market trend in the coming months.
While the S&P 500 recently reached new highs, there has been a noticeable shift in the market dynamics. The index corrected, while small-cap stocks saw significant gains, with the small-cap benchmark surging by 11.5% in its best 5-day performance against the S&P 500.
This surge in small-cap stocks raises an important question: Could this be the beginning of a long-awaited rotation towards undervalued small caps? By examining historical trends and potential interest rate cuts after September, we can determine if small caps are poised for a bull run.
Small-cap stocks are currently undervalued compared to large caps, signaling a potential opportunity for investors. Historically, small-cap stocks have outperformed large caps during periods of Federal Reserve rate cuts, which could be on the horizon as the economy shows signs of improvement.
Analyzing copper prices and the US 10-year Treasury bond yield can provide insights into future interest rate trends. A monthly reversal pattern in copper prices suggests that interest rates may be set to decline, potentially leading to more rate cuts after September.
Recent data indicates that the US economy remains healthy, with credit growth on the rise. This uptick in credit creation mirrors previous economic expansions and suggests strong economic growth and momentum.
In conclusion, the recent market trends and indicators point towards a potential opportunity in small-cap stocks, especially in the context of expected interest rate cuts and a healthy economy. Investors should consider diversifying their portfolios and exploring opportunities in small-cap stocks to capitalize on the current market dynamics.
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Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research and consider the risks associated with investing in any asset.