U.S. Tech Stocks and Small-Cap Stocks Hit New Highs
Broad U.S. stock indices have recently reached new highs. This follows the significant corrections triggered by U.S. reciprocal tariffs in April, which have since subsided. Figure 1 shows the subsequent performance of U.S. stocks from July onwards, broken down by earnings outlook and valuation for the S&P 500 Index, Nasdaq-100 Index (heavily weighted towards large-cap tech stocks), and Russell 2000 Index (small-cap stocks). All indices recorded significant gains driven by valuation expansion amid expectations of Federal Reserve (Fed) rate cuts. However, the Nasdaq-100 Index also benefited from improved earnings outlook, likely reflecting heightened expectations for accelerated investment in Artificial Intelligence (AI) related investment. On the other hand, for the Russell 2000 Index, whose earnings are seen as more susceptible to U.S. domestic demand trends, earnings outlook is a negative contributor. This suggests persistent concerns about the U.S. domestic economy.
Full article: pdf HERE
Written by Hitoshi Asaoka, Chief Strategist, Asset Management One Co., Ltd