An Index Breakout and a Big Bet on Small-Caps by a Famed Investor
Many big fund managers released 13F forms Wednesday, which show their holdings in the first quarter of the year.
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Market worries about an uptick in inflation were addressed on Wednesday by a softer-than-expected core CPI report. The report wasn’t a big surprise but market participants have been growing more concerned about the combination of a weak consumer and stubborn inflation. While there wasn’t a big shift in expectations for an interest-rate cut, there is now less worry that the next Fed move may be a hike.
The economic news triggered technical breakouts in the senior indexes to new all-time highs. One of the more interesting and positive aspects of the rally this time is that it isn’t narrow, and it isn’t just a few big-cap technology names. The Magnificent Seven names continue to perform well, but they are not the leaders they were during the last move to new highs.
Under the surface, small-caps continue to attract speculative interest. There were nearly 1,500 names hitting new 12-month highs on Wednesday and very good breadth. The small-caps have been underperforming for years, and it looks like they are starting to play catch-up.
Many big fund managers released 13F forms Wednesday, which show their holdings in the first quarter of the year. Stanley Druckenmiller, who is considered by many to be one of the greatest investors ever, added Russell 2000 IWM calls as his top position. He recently made a killing on his Nvidia NVDA investment so his interest in small-caps may attract more investors to the group.
Investors Business Daily moved its market exposure recommendation back up to 80%-100% following the technical action on Wednesday. The last time they moved to full exposure was on February 12.
The best thing about this market is that while the indexes may be overbought at this point, there are plenty of individual stocks that are not. This is a very good environment for stock pickers and not just for index trend followers or Magnificent Seven fans.
We have a mild start to the day with some economic news coming up.
At the time of publication, Rev Shark was long NVDA.
