Arguing against a correction and for small caps
Main indexes green; Dow out front up ~1.3%
Small cap index Russell 2000 up ~2.6% out-performing large caps
10/11 S&P 500 sectors up; Industrials lead gains, utilities dip
Dollar edges down; gold, bitcoin both down >1%; crude rises
U.S. 10-Year Treasury yield falls to ~4.24%
Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com
ARGUING AGAINST A CORRECTION AND FOR SMALL CAPS
Yung-Yu Ma, CIO at BMO Wealth Management, described Wednesday's sell off as "eye-opening for many who may be overly exposed to megacap tech."
But a research piece before the open, the chief investment officer said that the "health of earnings season should prevent the market from falling into a full-blown 10% correction."
He said that he did not "believe that momentum will build to the downside." And sure enough, Thursday's market was looking a lot more perky, at least by early afternoon.
Here's why. Along with healthy earnings, the CIO is also hoping for help from the Federal Reserve. He wants the Fed to take the opportunity, after its Federal Open Market Committee meeting which ends on July 31, to signal an "ability to shift aggressively toward rate cuts if the labor market weakens."
With the promise of megacap technology and AI needing to "grow into current valuations" he also sees the "catch-up trade in smaller stocks" having more room to run.
So Ma suggests that investors look for opportunities that "may be in areas other than technology"
He sees earnings growth among smaller companies improving by year end, and notes that when the Fed starts its rate cutting campaign it will "disproportionately benefit smaller companies."
Also, if Donald Trump wins the U.S. Presidential election, Ma sees the prospect of tariffs and trade shocks hurting large companies and turning investors' attention to smaller companies.
(Sinéad Carew)
*****
FOR THURSDAY'S EARLIER LIVE MARKETS POSTS:
SCARY HEADLINES AND RED DAYS MAY HAPPEN, BUT CAN STILL HAVE A SOLID SECOND HALF - CLICK HERE
CHEW ON THAT, POWELL: GDP, DURABLE GOODS, JOBLESS CLAIMS - CLICK HERE
NASDAQ DOWN, S&P 500 DIPS, DOW GAINS IN EARLY TRADE - CLICK HERE
S&P 500 INDEX: AFTER SHARP SLIDE, SEEKING TO STABILIZE - CLICK HERE
WHAT'S UP WITH THE YEN? - CLICK HERE
WHY UBS LIKES BANKS - CLICK HERE
STOXX 600 DROPS TO 12-WEEK LOW AS EARNINGS FAIL TO IMPRESS - CLICK HERE
GLOBAL EQUITY SLUMP SET TO GATHER MOMENTUM IN EUROPE - CLICK HERE
STOCK ROUT SPREADS BEYOND TECH - CLICK HERE
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.