Kip Herriage
Founder & Managing Partner of Vertical Research Advisory
US small caps should keep climbing from all-time highs, which history clearly shows is the best time to invest; the Russell 2000 closed at a record alongside the S&P 500 and other major indexes. Today's 4.65% 10-year yield is low next to the 6.1% average, with spikes above 7%, during the 1995-2000 dot-com melt-up, the most compressed bull market in US history. Nominal GDP of $32.5T also dwarfs 2000's $10.3T. x.com x.com x.comÂ
Banks and XLF look to have bottomed this past week, supporting a local bottom in US small caps. Stockspy1 noted that the Russell 2000 includes many regional banks, linking the banking-sector turn to IWM. x.comÂ
Falling rates and buying in financials, consumer discretionary and Home Depot make US small caps a very good buy here with high probability. The drawdown exceeds 11%, as it did at the start of the Iran war, and daily RSI and MACD are at similar bottoms. x.comÂ
High interest rates are hurting US small caps. The Russell 2000 is retesting its May lows even while the Dow is up and the S&P 500 is only slightly lower. x.comÂ
Betting against US small caps means fighting trend, valuations and smart money, all of which favor the bulls. x.comÂ
US small caps look as bullish as they possibly could after an insanely clean breakout and retest of a five-year accumulation range, a setup that can run for years, not months. As the highest-risk equity index, the Russell 2000 is a barometer for high-risk assets broadly, and US liquidity is breaking out from its lows at the same time. This is not a bear market; everything should go a lot higher this year. x.comÂ
The Russell 2000's cheapest P/E among the major indices does not make small caps a buy. Once growth and earnings revisions are factored in, it looks like the least attractive index of the group. x.comÂ
US small caps are finally breaking out of their long pullback as the market recognizes that yields have likely topped, with inflation and Fed worries easing. x.comÂ
US small caps are drawing a rotation that signals the market is quietly going more risk-on. When the Nasdaq and S&P 500 printed their first red daily candles after 14 straight green days, the Russell 2000 still closed higher, showing money moving from large caps into small caps rather than leaving the market. x.comÂ
Small caps leading like this only happens when liquidity is everywhere, the equity version of shitcoins pumping near a top. The Russell 2000 is back at new all-time highs and running ahead of the S&P 500. x.comÂ
Small caps have the best chart of the three major US indexes, and money is flowing into the financials and biotech names the Russell 2000 is full of. The position was started on the post-FOMC flush and will be managed against the 9-day EMA, with the risk of exiting if Fed chair Warsh's press conference goes the wrong way. x.comÂ