This wee watch to see if we finally get that long-awaited, long-predicted, and never-quite-arriving rotation out of technology stocks (and especially those BIG tech stocks) and into smaller capitalization stocks, or consumer stocks or value stocks.
Just about anything really. The hope is for enough broadening in the advance to keep stocks moving higher even though the indexes are at record highs.
And maybe, just maybe that rotation arrived last week.
Here’s the suggestive data.
For the week, the Standard & Poor’s 500, a big cap index that has been dominated by the performance of the tech sector, gained just 0.91%,
The NASDAQ 100, the home of those BIG TECH stocks, actually lost 0.09%.
The Russell 2000, an index of 2000 smaller stocks, gained 4.95% on the week.
Now we’ve been here before and seen this kind of market action turn into a head fake.
But there’s reason to think that this time it’s different. An interest rate cut from the Federal Reserve would help smaller companies, which tend to have a harder time raising capital (and pay more for it) than bigger companies do, relatively more than larger companies. And with smaller company stocks trading at lower valuations than BIG TECH stocks, the high likelihood of at least one interest rate cut from the Fed in 2024 might well be all that’s needed for the rotation to actually occur this time.
