DEMZ - It's Rotation Time (Or Not) Again
2024-07-13 02:40:00 ET
Summary
- CPI report shows lower than expected price gains, increasing likelihood of Fed cutting interest rates in September.
- Lower inflation can benefit small-cap stocks by helping them maintain profit margins during economic slowdown.
- Uncertainty remains about durability of rotation from large cap growth stocks and reasons behind recent sell-off.
One day does not a trend make. But yesterday was a doozy of a reversal in the fortunes of large cap growth stocks and their long-suffering compatriots in large value and small caps. That, necessarily, begat a flood of chatter about one of the most beloved themes among financial talking heads - The Rotation. We have seen this movie before, and more often than not it proves to be a head fake rather than a sustained development. But given how long growth's outperformance has been going on, and how expensive many of these stocks have become, it's worth at least delving into the whys and the wherefores. As the chart below shows, the small cap frenzy in particular is continuing unabated in the early hours of trading this morning....
It's Rotation Time (Or Not) Again