RE:RE:RE:RE:RE:RE:RE:RE:Stock Market Shifts into Small Caps " ....with the issues of patent expiration facing Big Pharma, their focus is M&A of smaller biotech companies in order to sustain growth and to help outperform the general market ..."
and the rotation into small caps is beginning
Two reasons this is happening now 1) The fundamentals. We are moving into a “Goldilocks” scenario for the Federal Reserve. Inflation is coming down, and growth is moderating but not stalling. The inflation data continues to give us more confidence that inflation is no longer threatening. Last week’s CPI report showed the first month-over-month decrease since 2020, and Bank of America’s Institutional Fund Manager survey showed that higher inflation is no longer investors’ number-one tail risk.
This backdrop of decent growth with fading inflation pressures and room to cut rates is compelling for risk assets.
2) The technicals. Given the smaller size and relatively less liquidity of the small-cap market, technicals also play a bigger role. Hedge funds came into the month with a near-record short position in small caps. When positioning is that stretched, it only takes a small spark to ignite a powerful rotation.