Mega-cap tech stocks, which are part of the Magnificent Seven, will kick off earnings season with Tesla (TSLA)
to report third quarter earnings results next week. With speculation forming around the Federal Reserve’s future interest rate moves, what does this mean for small-cap (^RUT) stocks? “Regardless of the fact that we have a pretty strong economy right now, Q3 GDP looks like it’s going to be above 3%. So that all plays to the small-cap rotation. Basically, in the high interest rate environment, you saw a lot of investors flock to the Mag seven names because they had size and safety,” JonesTrading Chief Market Strategist Michael O’Rourke tells Seana Smith and Brad Smith. “But now that we’re in this new easing cycle, you’re seeing that rally broaden out and it’s benefiting both small caps and mid caps,” he goes on to say, outlining the core differences between the Russell 2000 and S&P 600 (^SP600). O’Rourke views the Magnificent Seven’s overperformance as an opportunity for even the lowest S&P 500 (^GSPC) components to buoy the rest of the index.
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