Market review 24.07.14
Hello everyone,
In today’s post, I’ll briefly recap the past two months and where we could be headed. A lot is unfolding. Let’s begin.
A recap
In late May, I wrote a blog post titled “Small-cap summer.” The main bullish argument was that IWM had retested a 3-year base breakout while rates and inflation were set to come down:
A few days later, on the May 30th release of GDP data, IWM outperformed QQQ by over 200 bps. Since 2022, there had only been 15 days (out of 600+) where this happened, and all were clustered around major pivot lows (see arrows on the chart below):
All this made me gradually build a high portfolio allocation to small caps (IJR, FTXO, XBI) and other areas benefitting from lower rates and USD (FFTY, EWJ, GDXJ, SILJ). While late May was the bottom in small caps, IWM was flat in June, while QQQ ripped. I significantly underperformed.
By mid-June, I had gradually started shifting my allocation to large-cap growth, and by the week ending July 5th, my performance had caught up.
In last week’s post, we looked at how 2-year Treasury yields made a breakdown and that USD/GBP was on the verge of doing so. Major equity indices (equal-weighted SPX and NDX) were on multi-year support. I discussed how we could see selective rotation, but that large-cap growth was still the leader.
However, coming into the week, I tweeted the setup described above and that a lively economic calendar could spark moves in equal-weight indices and IWM.