An Injection of Bullishness
Following the Fed’s surprisingly aggressive 50 basis point rate cut yesterday, the market has erupted in a bullish roar today.
Let’s take a look at some of the major indices and what’s been going on:
Above is a 5-day chart of the S&P 500 and as you can see, today opened with a massive volume spike of buying (in green) that far outpaces any buying volume in the past week.
By noon today, the S&P was already up about 1.75%.
Now, let’s take a look at the tech-heavy Nasdaq:
The Nasdaq is also seeing a plethora of buying activity, climbing over 2.75% by noon today.
We are also seeing a similar story with the Dow:
By noon today the Dow climbed over 1.3% (or 550 points), a pretty big move for the Dow.
And most compelling in my opinion, we have the Russell 2000 with the same story.
By noon today, the Russell 2000 (RUT) was up over 2%.
Now, If you’re not familiar with the RUT, it’s an index composed of the smallest 2,000 stocks in the Russell Index. It’s an index that’s broadly used to track small and micro-cap companies… Think small, cutting-edge innovative startups.
But here’s the deal, in times of high-interest rate environments, these smaller — and sometimes more debt heavy — companies typically perform much worse. This is in one part due to treasury bonds and other safe assets paying higher yields, making it less attractive to own such a risky growth-centric asset.
So, in other words, small caps and microcaps perform much better in lower interest rate environments. And I’m really excited to have the Russell 2000 and all the small-cap companies popping back up on our radar as potential investment targets.
They can be incredibly volatile but with that comes a wealth of opportunity for us as traders.
Now, as I shared yesterday, I am not exactly sure how long this bullish trend will continue, especially for small caps. But if it’s a trend that will continue for some time, we may be able to make solid gains on some small cap positions.
— Nate Tucci
P.S. Be sure to catch my Ford vs Tesla presentation on Monday at 1pm Eastern by registering your spot right here!
