Macro Observations

While the markets remain enamored with the small-cap rally, there are other areas of the market that are experiencing a renaissance of their own. The value trade is pulling a lot of segments of the market higher right now, even one that may not seem like it deserves it - regional banks. The group is up 20% since July 10th, but it raises questions about whether the group really deserves it.

Last week, Crowdstrike, a global cybersecurity company, managed to bring the entire world to its collective knees. It begs some larger questions. How vulnerable are our computer systems? If a glitch in a software update was able to cause global chaos, what could cybercriminals be capable of? The biggest question of all: have we become entirely too overconfident in what the future of AI could mean?

Over the past week and a half, small-caps haven’t just rallied relative to large-caps. They’ve historically rallied. But are those results meaningful in telling us what might happen next? Is this a good sign? Is it a bad sign? We can try to interpret what market rotations and current underlying conditions tell us what could happen moving forward. Let’s examine a few arguments.