It was one of those summer weeks when it would have been better to be on a beach instead of staring at screens mostly dotted with red arrows.

July has been a cold month for Information Technology (XLK) and Communication Services (XLC). Conversely, the most significant sector decliners, Real Estate (XLRE), Materials (XLB), and Consumer Discretionary (XLY), have caught bids. Financials (XLF) are coming on strong as super regionals rebound.

Factor Trends

Last Friday saw pressure equality distributed across the board.

Big Week for Small-Caps

The long-awaited rotation finally kicked into high gear as mega-caps stumbled and investors discovered small-caps (with a focus on value). This move isn’t a ‘flash in the pan.’ There are several drivers of the move:

• Fed Ready to Cut Rates
• Earnings Growth Assumptions
• Donald Trump’s Polling

Mood & Trends

Coming into last week, the Fear & Greed Index was in the ‘Greed’ zone and looked to be on its way to ‘Extreme Greed.’

My Fear

My biggest stock market concern is the Federal Reserve waiting too long to begin cutting rates and allowing the economy to slip into recession. Admittedly, this may be the best route for Powell & Co. to be sure they’ve licked inflation, but it wouldn’t be suitable for the stock market.

Economic Calendar

The economic calendar is light this week.

The earnings calendar is filled with numerous names capable of influencing the broader market.

Biden Drops Out

Although it has been in the rumor mill all year, President Biden's announcement of his departure from the presidential election race hit like a lightning bolt.

There are two questions the market is eager to know.

Will President Biden remain in the Oval Office or step down?

The market was shaky all day on Friday. While the financial media was stuck on the global outage of Microsoft's operating system, NBC reported that the Biden family was looking for a graceful exit that sent investors to the exits. The issue is whether Biden is fit to be the Commander-in-chief.

Who replaces Biden at the top of the Democratic ticket?

Vice President Harris is the odds-on favorite, but many names have been floating around. There is deep concern within the party over Harris's ability to win. Other names include the governors of California and Kentucky. But it will be challenging to ditch a woman for a man. On that score, Hillary Clinton has risen a lot in betting polls.

Today’s Session

The market is doing well, considering all the news over the past ten days. Still, a certain edginess is typical when there are many unknowns. The good news is that the S&P 500 is still well above its 50-day moving average.

I like the small-cap rally, but some questions will not be answered until the next few quarters of financial releases.  This morning, mega cap has returned to its role as a safe haven.

Comments

CP, Thank you for writing "Commander-in-chief". This simple title separates you from all the thin-brained pundits blabbering incorrect platitudes. T in Tx Tim in Texas on 7/22/2024 10:39:41 AM

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