Value and the smaller capitalized issues outperformed the mega caps again yesterday. A quote on a financial website read “Investors may be looking to rotate away form large technology companies, which are widely owned and have fewer clearer catalysts going forward.”
As widely acknowledged growth..aka the mega cap issues—have outperformed for many years at the expense of the rest of the market. At times the rest of the market did outperform but these periods were short lived, and many times then traded to lower lows.
A very dated statistic [about 15 months ago] indicated that if the 20 largest companies declined by 10% the rest of the market would have to rally 90% to keep the S & P 500 unchanged.
A basic premise for higher share prices is more buyers than sellers. If buyers are exhausted, the odds of declines are high. Trees don’t grow to the sky and amoebas don’t continue to grow infinitely. There is a limit to growth.
Legendary investor Stan Druckenmiller stated yesterday the markets are pricing in a Trump victory. When Trump won in 2016, value and small cap companies surged. Druckemiller indicated that he will not vote for either candidate but instead “will probably write someone in.” He called Trump a “blowhard” and stated Harris “would be bad for business” given her regulatory and tax agenda.
Commenting about the Treasury market was relatively quiet, the yield curve remaining essentially unchanged.
Speaking about Treasuries, Druckenmiller stated that he thinks the Fed’s half point cut in September “was a mistake,” that inflationary pressures have not been greatly lowered due to the increase in labor expenses, and that his firm shorted bonds after the announcement.
Treasuries have been crushed since the Fed lowered rates with the benchmarks about 40 bps higher in yield since the announcement.
Last night the foreign markets were mixed. London was up 0.35%, Paris up 1.12% and Frankfurt up 0.60%. China was down 1.05%, Japan down 0.69% and Hang Seng down 1.02%.down
Futures are bifurcated as Dow futures are flat and NASADQ up 0.50%. The 10-year is off 7/32 to yield 4.03%.
