July 18, 2024
The Big Rotation, as it was labeled last week, has been less of a pivot from rally-leading equity sectors (like mega-caps) and more of a mad-dash into rally-lagging sectors (like small caps). I use the term mad-dash to underscore what seemed to be an emotionally charged scramble by traders rather than a move driven by fundamental economic reasoning. I doubt the 11.5% gain in the past week in the Russell 2000 (the Small Cap Index) has much more room to go.
A double-digit gain in the Russell 2000 Index (RTY) in a week is not as unusual as financial news outlets would lead you to believe. It’s not common, but it’s easy to understand why big moves occur there. It is about market cap. The 2000 companies making up the index have a combined market cap that is less than the market cap of Apple Inc (AAPL) – $3.3 Trillion vs $3.5 Trillion. The market cap of the Mag 7 is over $14 Trillion. Interestingly, when the uncommon has occurred in the past, and the RTY gains 10%-plus in the span of a week, it usually comes in the context of steep losses either before or after the one-week move.
Was yesterday’s correction in all the major equity indices the final act in the rotation (aka RTY rally)? We’ll see, but futures this morning are pointing in that direction. Overnight Taiwan Semiconductor’s earnings gave a shot in the arm to the AI/big-tech theme – NASDAQ Futures are up +.60%, RTY Futures are down -.40%, and SPX Futures (the King Contract) are up +.25%.
If not today, I suspect we will soon return to our regularly scheduled programming of economic data watching and trying to balance expectations of future rate cuts against disinflation and signs of a slowing economy.
Be well,
Mike
Disclosures
Investment advisory services offered through Robertson Stephens Wealth Management, LLC (“Robertson Stephens”), an SEC-registered investment advisor. Registration does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. This material is for general informational purposes only and should not be construed as investment, tax or legal advice. It does not constitute a recommendation or offer to buy or sell any security, has not been tailored to the needs of any specific investor, and should not provide the basis for any investment decision. Please consult with your Advisor prior to making any Investment decisions. The information contained herein was compiled from sources believed to be reliable, but Robertson Stephens does not guarantee its accuracy or completeness. Information, views and opinions are current as of the date of this presentation, are based on the information available at the time, and are subject to change based on market and other conditions. Robertson Stephens assumes no duty to update this information. Unless otherwise noted, any individual opinions presented are those of the author and not necessarily those of Robertson Stephens. Performance may be compared to several indices. Indices are unmanaged and reflect the reinvestment of all income or dividends but do not reflect the deduction of any fees or expenses which would reduce returns. A complete list of Robertson Stephens Investment Office recommendations over the previous 12 months is available upon request. Past performance does not guarantee future results. Forward-looking performance targets or estimates are not guaranteed and may not be achieved. Investing entails risks, including possible loss of principal. Alternative investments are only available to qualified investors and are not suitable for all investors. Alternative investments include risks such as illiquidity, long time horizons, reduced transparency, and significant loss of principal. This material is an investment advisory publication intended for investment advisory clients and prospective clients only. Robertson Stephens only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Robertson Stephens’ current written disclosure brochure filed with the SEC which discusses, among other things, Robertson Stephens’ business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov. © 2024 Robertson Stephens Wealth Management, LLC. All rights reserved. Robertson Stephens is a registered trademark of Robertson Stephens Wealth Management, LLC in the United States and elsewhere.