In recent weeks, there has been a notable shift in the stock market as investors have been selling high-flying Big Tech shares in favor of smaller stocks that had been impacted by the Federal Reserve's interest rate hikes. This change in investment strategy followed a series of reports indicating cooling inflation, which has raised optimism among traders for a potential rate cut by the Federal Reserve in September.
Currently, there is a widespread belief on Wall Street that a September rate cut is highly likely. However, concerns have arisen due to signs of a weakening labor market, causing a significant downturn in the stock market. On Monday, all 11 sectors of the S&P 500 experienced declines, reflecting the overall negative sentiment among investors.
One index that has been particularly affected by these developments is the Russell 2000, which tracks the performance of US small-cap stocks. The index has seen a sharp decline of over 11% in the first few trading days of August, following a notable 10.1% increase in July. This volatility in the small-cap stock market underscores the uncertainty and rapid shifts in investor sentiment in response to changing economic indicators.
