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%
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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)
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FOR THURSDAY'S EARLIER LIVE MARKETS POSTS:
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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
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