Scary headlines and red days may happen, but can still have a solid second half
U.S. stock indexes gain; Dow >1%, S&P, Nasdaq on its coat-tails
10/11 S&P 500 sectors up; Industrials leads gains, utilities dip
Dollar edges down; gold, bitcoin both down >1%; crude up <1%
U.S. 10-Year Treasury yield falls to ~4.24%
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SCARY HEADLINES AND RED DAYS MAY HAPPEN, BUT CAN STILL HAVE A SOLID SECOND HALF
The small-cap Russell 2000 .RUT recently had one of its best 10-day rallies ever. Indeed, over the 10-day period into its July 16 close, the RUT jumped 11.5%.
Ryan Detrick, chief market strategist at The Carson Group, took a look at this and found 23 other times the RUT gained at least 10% in 10 trading days.
According to Detrick, returns going forward were extremely strong. In fact, he says the Russell 2000 was higher a year later more than 86% of the time and up nearly 27% on average, which he believes should give many long-suffering small-cap bulls hope.
"Yes, we think small caps will outperform large caps the rest of this year, but that doesn’t mean large caps can’t have some more fun. In fact, it is quite likely," writes Detrick in a note.
Detrick says that the recent margin by which the small-cap Russell 2000 outperformed the large-cap Russell 1000 .RUI was extremely rare.
He found only four other instances of such out-performance and the S&P 500 was up 20% on average a year later and higher three times. He says the one time it didn’t work was the March 2000 tech bubble peak. Still, when combining this with other studies, including what he says is a recent "buying thrust" within the S&P 500, Detrick continues believe there can be a solid second half of the year.
However, Detrick does caution that September and October are historically poor months in an election year.
He adds "We’ve been quite spoiled with such a strong start to ’24 and this was on the heels of the huge year last year. Buckle up, as we likely will see some scary headlines and red days ahead of the election."
(Terence Gabriel)
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