After last week's violent selloff, one stock market rotation ended and another may have begun
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The stock market selloff triggered by fears that the Federal Reserve missed its chance to help the US economy ended one rotation trade and may have started another. The technology-heavy Nasdaq 100 Index tumbled into a correction and the S&P 500 Index lost 3.2% in two days. However, utilities and real estate companies were the best performers in the S&P 500 for the week. Investors are pouring money into real estate and utility sector US exchange-traded funds. This is the second stock market rotation investors have faced recently. The first rotation trade saw demand for small-capitalization companies taking off, but that ended when the valuation spread between small caps and large caps widened. Now, with rate cuts seemingly on the way and Treasury yields plunging, investors are piling into dividend-paying, lower volatility stocks. The stock market may face more pain as August and September are historically the worst two months for US stock market returns. Volatility is surging, with the Cboe Volatility Index reaching its highest level since March 2023. Traders are finding it difficult to predict the market due to the extreme degree that risk assets have front-run the Fed's first rate cut. Investors are not paying up to hedge for a possible selloff. Contracts protecting against a 10% decline in the largest ETF tracking the S&P 500 currently cost just 1.9 times more than options that profit from a 10% rally.
#StockMarket #RotationTrade #UsEconomy #FederalReserve #S&p500 #Nasdaq100Index #Utilities #RealEstate #DividendpayingStocks #RateCuts #TreasuryYields #SmallcapCompanies #LargecapCompanies #Volatility #RiskAssets #Hedging
https://fortune.com/2024/08/04/stock-market-crash-new-rotation-trade-economic-outlook-recession-utilities/
Fortune /
npub1v7…9v0r4
2024-08-04 15:18:20
Author Public Key
npub1v7hvaa8pv7g92sr6na55dtzaxmrrsgddxkhst3e8atw4nxusm37sg9v0r4Published at
2024-08-04 15:18:20Event JSON
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"content": "After last week's violent selloff, one stock market rotation ended and another may have begun\n==========\n\nThe stock market selloff triggered by fears that the Federal Reserve missed its chance to help the US economy ended one rotation trade and may have started another. The technology-heavy Nasdaq 100 Index tumbled into a correction and the S\u0026P 500 Index lost 3.2% in two days. However, utilities and real estate companies were the best performers in the S\u0026P 500 for the week. Investors are pouring money into real estate and utility sector US exchange-traded funds. This is the second stock market rotation investors have faced recently. The first rotation trade saw demand for small-capitalization companies taking off, but that ended when the valuation spread between small caps and large caps widened. Now, with rate cuts seemingly on the way and Treasury yields plunging, investors are piling into dividend-paying, lower volatility stocks. The stock market may face more pain as August and September are historically the worst two months for US stock market returns. Volatility is surging, with the Cboe Volatility Index reaching its highest level since March 2023. Traders are finding it difficult to predict the market due to the extreme degree that risk assets have front-run the Fed's first rate cut. Investors are not paying up to hedge for a possible selloff. Contracts protecting against a 10% decline in the largest ETF tracking the S\u0026P 500 currently cost just 1.9 times more than options that profit from a 10% rally.\n\n#StockMarket #RotationTrade #UsEconomy #FederalReserve #S\u0026p500 #Nasdaq100Index #Utilities #RealEstate #DividendpayingStocks #RateCuts #TreasuryYields #SmallcapCompanies #LargecapCompanies #Volatility #RiskAssets #Hedging\n\nhttps://fortune.com/2024/08/04/stock-market-crash-new-rotation-trade-economic-outlook-recession-utilities/",
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