Business

Is a red wave coming?

By October 17, 2024 No Comments

The rally on Wall Street reasserted with the benchmarks rebounding and the Russell 2000 small/mid-caps leading. The rotation towards the laggards and more cyclical sectors of the market continued. The stock market appears to be pricing in a Trump win at the election.

Investors presently see a Republican victory as being more a favourable outcome for the economy. Precious metals also rose on Wednesday, despite a stronger dollar, with a Republican win potentially more inflationary. The UK reported an inflation rate of just 1.7% in September down from 2.2% in August, in yet another sign that central banks are at the beginning of an aggressive easing cycle.

The S&P 500 added 0.47% to 5,842, the Nasdaq Composite climbed 0.28% and the Dow Jones added 0.79%. Both the Russell 2000 index and the S&P600 Small Cap index climbed around 1.5%, continuing the recent run of outperformance against the major benchmarks. This is a clear sign the bull market is broadening. Financial stocks also had a strong run led by Morgan Stanley, which surged 6.5% on strong earnings. The Nasdaq Golden Dragon Index of major China tech stocks rebounded +1.5% as the recent corrective reversal looks to have run its course with support now being found.

After leading for such a long period, gains in mega-cap tech and mag 7 stocks are slowing given very expensive valuations. Gains in the so-called Magnificent Seven group of tech stocks have driven most of Wall Street’s record-breaking run this year, and we are now seeing the baton being passed to smaller/midcap companies. This is encouraging and reinforces

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Carpe Diem!

Angus

Disclosure: Fat Prophets and its affiliates, officers, directors, and employees may hold an interest in the securities or other financial products relating to any company or issuer discussed in this report. Fat Prophet’s disclosure of interest related to Investment Recommendations can be provided upon request to members@fatprophets.com.au.

Chart Source: Thomson Reuters

 

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