US stocks recorded mixed returns for the 2nd consecutive week, with small-cap and value shares continuing to outperform large-cap growth stocks that have led the market over much of the year. Indeed, at the close of trading on Thursday, the Nasdaq 100 Index was lagging the broader S&P 500 and barely outperforming the small-cap Russell 2000 Index for the year to date, before large-cap growth shares rebounded to close the week. The week was also notable for the S&P 500 selling off on Wednesday by more than 2% for the first time since February 2023, while the Nasdaq suffered its worst loss since October 2022. micro seemed to take precedence over the macro for much of the week, as investors absorbed one of the busiest weeks of the earnings reporting season.

Semiconductor stocks have started correcting and the Mag7 are engaging in stock buybacks, while US debt produces less GDP per borrowed dollar than it used to. Each week, the Syz investment team takes you through the last seven days in seven charts.

Stocks were volatile this week with continued rotation in market leadership to small-cap and value shares. U.S. markets initially rallied to new-highs but faded toward week's end, led by weakness in the tech sector. The S&P 500 and Nasdaq closed lower on the week, while the Dow posted a solid gain. Value stocks outpaced growth stocks by 477 basis, as measured by Russell indexes—the largest divergence since March 2023. The week was also notable for a widespread global disruption to computer systems early Friday due to an error in a vendor’s security update to some users of the Microsoft operating system.

Good inflation figures are raising hopes for a new rate cut by the FED as soon as September. Small and mid-caps are reaping the benefits of the shifting tides, while Biden’s odds have taken a turn for the worse. Each week, the Syz investment team takes you through the last seven days in seven charts.

The summer seems sweet for bond market which just received a welcome boost from the latest US CPI released below expectations. The market is now priced more than 90% chance to get a rate cut in September.

US stocks gained in the first notably broad advance since mid-April. The Dow Jones, S&P 500 Index and Nasdaq Composite moved to record intraday highs, but the biggest advance was notched by the small-cap Russell 2000 Index, which gained 6.00%, marking its best week since early November. Value stocks also handily outperformed growth stocks. Q2 earnings season kicked off Friday with releases from JPM, Wells Fargo and Citigroup. The first 2 missed estimates while the latter cut its outlook. A major factor supporting stocks appeared to be Thursday’s release of the US CPI as headline prices fell 0.1% in June, the first decline in 4 years. In the wake of the report, the Russell 2000 Index outperformed the large-cap S&P 500 and the Nasdaq by 209bps and 581bps respectively.

If history is any indication, volatility is set to soar. Meanwhile, UK voters largely favored the Labor party, and the bets are on for who will replace Joe Biden as democratic nominee. Each week, the Syz investment team takes you through the last seven days in seven charts.

With job market challenges potentially hastening Federal Reserve rate cuts before the elections, and looming expansive fiscal promises exerting pressure on long-term yields, the stage is set for significant movements in the US bond landscape.

The S&P 500 is up 16% YTD, with the benchmark recording its 4th positive week in the last five as investors bet that any economic weakness later this year will be met with a Fed rate cut. The Nasdaq’s YTD gain is 22%. As measured by Russell 1000 indexes, growth shares outperformed value stocks by 415 basis points over the week, while small & mid caps recorded losses. Expectations for lower interest rates, fed by signs of weakening growth and easing inflation pressures, seemed to remain a major factor in favouring growth stocks. On Monday, the ISM posted its lowest reading of manufacturing activity (48.5) since February. More surprising may have been a sharp downturn in the ISM’s current services sector activity, which plunged from 53.8 in May to 48.8 in June.

The US labour market is cooling down, and today’s Employment report brought another confirmation of this trend. Job creations in the private sector have settled below 200k per month throughout Q2 and declined to 136k in June. The unemployment rate ticked up to 4.1%, its highest level of this expansion cycle. Only government jobs continued a solid upward trend, which may not be surprising in an electoral year. The normalisation of the US labour market is one of the five key trends to watch for the next 6 months (cf. Syz H2 2024 Market Outlook: Normalisation ahead). Today’s US Employment Report fits into this dynamic, which is at the heart of our expectations for economic growth normalisation, softer inflationary pressures and central bank rate cuts.