"Rate Cut Trade" & "Trump Trade" Lead the Way as Small-cap Stocks Rise Strongly, While Commodities Fall Across the Board | Overseas Major Asset Weekly Report
The U.S. stock market is witnessing a "big switch" in trends, as investors accelerate their exodus from large-cap tech stocks. Concerns over inflation reignited due to the "Trump trade," putting pressure on long-term U.S. bond yields and boosting the U.S. dollar, leading to a decline in most commodities
During the week of July 15th to July 19th, influenced by the "rate cut trade" and the "Trump trade", a "big switch" in the US stock market continued to unfold. Investors accelerated their exodus from large-cap tech stocks, with small-cap stocks becoming the focus of the entire market.
This week, the S&P 500 and Nasdaq fell by about 2% and 3.7% respectively, marking their worst weekly performance in three months. The Nasdaq halted its six-week winning streak, with semiconductor stocks being the "hardest hit" as they fell by nearly 9% throughout the week. In contrast, the Dow and the small-cap Russell 2000 index rose by 0.7% and 1.7% respectively. Some market analysts believe that against the backdrop of boosted expectations of rate cuts and gradually improving earnings, small-cap stocks are expected to continue to be supported.
In terms of commodities, due to concerns about reigniting inflation from the "Trump trade", the US long bond yields were under pressure, pushing up the US dollar. Coupled with the potential ceasefire agreement between Israel and Palestine, oil prices fell by over 2.5% for the entire week, with US oil briefly falling below $80 to hit a one-month low.
Copper fell by 5.7% for the worst performance since 2022. The US dollar and US bond yields rising together put pressure on precious metal prices, with gold failing to rise for the fourth consecutive week.
The US dollar saw its first weekly gain in three weeks, while non-US currencies generally fell. The euro fell by 0.23% against the US dollar this week, and the pound fell by 0.57% against the US dollar this week. However, the yen against the US dollar reached a six-week high during the week. According to daily operation data released by the Bank of Japan, the Japanese government may have intervened with an amount close to nearly 6 trillion yen last week.
US bond yields rose across the board this week, with the 2-year and 10-year US bond yields rising by approximately 6 basis points for the week.
The chip sector led the decline in US stocks this week, while the regional bank index rose for several trading days in a row to reach its highest level in over a year