| Rate-Cut Hopes Are Kickstarting a Shift Indeed, odds for a September rate cut jumped to 95% this past week. So – that means stocks are soaring now, right? Well, it's a bit more complicated than that. Some stocks are soaring. Others are not. Here's why. Thus far, the stock market rally of 2024 has been exceptionally narrow due to a lack of investor confidence about the go-forward path on inflation, interest rates and the economy. Therefore, investors have piled into red-hot AI stocks – driving the market averages up – while ignoring pretty much everything else. But now investors are finally seeing the light at the end of the tunnel, if you will. And this narrow market rally is "broadening." After this week's soft inflation report, Wall Street is finally convinced that inflation will fall to 2%, the Fed will cut interest rates and the currently hobbled U.S. economy will improve in the coming months. As a result, investors are starting to feel like they don't have to hunker down exclusively in Big Tech and, instead, can start placing bets on other stocks in the market. That's why the 'Magnificent 7' tech stocks were down more than 3% on Thursday, with AI favorite Nvidia Corp. (NVDA) down over 5%. On the same date, the small-cap Russell 2000 index had its best day of the year, rallying nearly 3.5%. This shift is what we're calling the "Great Broadening of 2024."
The Final Word on Soft Inflation Data’s Impact We expect that as the Fed shifts into rate-cut mode and the economy regains its strength, this great broadening will continue for the rest of the year. Small-cap stocks will stage furious catch-up rallies. Large caps will cool off. And we think that in order to profit from this market shift, you need to be invested in both small- and large-cap stocks for the next several months – with a heavy bias toward smaller stocks (not the Magnificent 7). But with a market so frenzied, it can be hard to know where to focus your attention. Learn about a few of our favorite stocks to buy right now. Regards, | 
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