The Great Rotation Is Underway

Think Big by Thinking Small [The Daily Reckoning] August 03, 2024 [WEBSITE]( | [UNSUBSCRIBE]( The Great Rotation Is Underway Kennesaw, Georgia Editor’s note: The Federal Reserve may cut rates in September, which is more likely after yesterday’s disappointing jobs report. As income specialist Zach Scheidt shows you today, a rate cut represents great opportunities for investors. If you want big gains, you should think small. [Zach Scheidt] ZACH SCHEIDT Dear Reader, A seismic shift is rumbling through the financial markets in the second half of 2024. That’s right. Let’s break it all down… As I’m sure you know, the Fed held interest rates steady at this week’s FOMC meeting. That was no surprise. But after years of tightening, the Fed is finally expected to pivot toward rate cuts, quite possibly in September. Friday’s disappointing jobs report only reinforces the view that the Fed will cut in September. The U.S. economy created 114,000 non-farm payroll jobs in July, far below expectations. The consensus forecast was 175,000 jobs. The disappointing July number is a steep decline from June’s 179,000 jobs. It’s no surprise then, as Investor’s Business Daily reports, investors are now pricing in a 100% chance of a Fed rate cut at the FOMC meeting in September. That’s up from just 64.1% from a month ago. A True Game-Changer We need to be clear about this. A rate cut wouldn’t be just another blip on the economic radar. It would be a game-changing development set to dominate market trends well into 2025. After all, the Fed's aggressive rate hikes have been the defining feature of the financial landscape for a number of years now. Now that’s about to change. As this chapter draws to a close, a new one opens — and it's filled with uncertainty, especially in an election year. And while it’s entirely possible that the Fed lowers rates in September, that’s not a done deal, despite what the market anticipates. The market’s been predicting a “pivot” for a while now, and it hasn’t yet happened. As my colleague Jim Rickards has noted, the Fed doesn’t want to be seen as political (even though it is). Cutting rates less than two months before the election would certainly seem to be political. Jim thinks the Fed could still cut rates in November, after the election, and/or December. So the exact timing, pace, and magnitude of these cuts remain anyone's guess. We’ll just have to wait and see how it all pans out. But this ambiguity is precisely what's going to drive volatility in the coming months. [Urgent Buy Alert - Monday, August 5, 10:00 A.M. Eastern]( [click here for more...]( This coming Monday morning at 10:00 a.m. Eastern, our #1 trader will release an urgent buy alert to his readers using a unique and potentially extremely profitable trade setup he’s been tracking which could double your money FAST. This one idea could hand you a huge windfall in record time. [Click Here To Learn More]( Volatility Is Your Friend Investors aren't just sitting idle. They're already trying to anticipate the Fed's next move, creating ripples across the financial markets. Take Treasury bonds as an example. Treasury yields, which move inversely to bond prices, are likely to become a rollercoaster ride. One day, yields might plummet on expectations of aggressive rate cuts (they came down today). The next day, they could surge on strong economic data that suggests the Fed might hold steady. This back-and-forth will create volatility that we haven't seen in years. But here's the thing: Volatility isn't inherently bad; it actually leads to opportunity. It could actually trigger a massive stock rotation through the end of this year — and likely many years beyond that. In other words, we’re staring the next major market opportunity right in the face. I've been closely watching for signs of this shift, and it looks like it’s here. The market is about to flip the script, and you need to be ready. Here’s what you can expect… The Interest Rate Domino Effect Over the past year, we've seen the Magnificent Seven — mega-cap tech stocks like Nvidia, Amazon and Microsoft — dominate the market and the financial media. But as the old saying goes, the bigger they are, the harder they fall. Here's why. As the Fed signals a pivot towards rate cuts, it's going to set off a chain reaction that could dramatically shift money flows in the market. Once investors get this signal, it’s game on. They won’t wait for the September meeting before they start buying and selling accordingly. When interest rates start to decline, it typically benefits smaller, growth-oriented companies more than their larger counterparts. That’s because these firms tend to rely more heavily on borrowing to fuel their expansion, so lower rates directly impact their bottom line. [Nearing Retirement? Claim This Exclusive $1 Book Offer Right Away!]( [click here for more]( “The Banker” is a hedge fund titan who spent years helping America’s richest families grow even richer. [And today, for the first time ever, he wants to send you his new book – where you’ll find 36 of his never-before-revealed income and wealth generating secrets.]( If the potential at steady, predictable income (as well the chance at a few nice, quick windfalls) interests you, then I urge you to act right away. [Click Here To Claim This Exclusive $1 Book Offer]( Moreover, in a lower-rate environment, investors tend to have a greater appetite for risk, which naturally favors smaller, more volatile stocks. On the other hand, the mega-caps that have been the market darlings might start to lose their luster. These companies have benefited from a flight to quality and their ability to weather higher rates. But as the tide turns, investors may start to view them as overvalued and overexposed. Now, you might be thinking, "If I don't own any of these mega-cap stocks directly, why should I care?" Too Many Eggs in One Basket Well, if you own any broad market index funds or ETFs, you're more exposed to these large caps than you might realize. The S&P 500, for instance, is heavily weighted towards these top performers. Right now, the top 10 stocks in the index account for over 30% of its total market cap. That's an unprecedented level of concentration! So, what happens when the market rotates away from these stocks? It could mean that the popular indexes many investors rely on for steady growth might underperform. Meanwhile, smaller companies — the ones that have been overlooked and undervalued for years — could start to outshine their larger counterparts. This is where the opportunity lies for savvy investors. During these pivotal rotations, we often see the market's strongest stocks begin to retreat. Meanwhile, other stocks and sectors that have been lying dormant start to wake up and take on new leadership roles. If you can spot these rotations early and position yourself accordingly, you can ride these emerging trends to fresh highs (my colleague James Altucher is also on top of this trend. [Go here]( to learn about the top five small-cap stocks that are set to lead the markets as this trend plays out). We're now seeing a powerful small-cap breakout that could take these stocks much higher. And it’s entirely possible that these small stocks could be the next market leaders. Now, this rotation shouldn't be a cause for alarm. Instead, you should view it as an opportunity. We're entering a new chapter of the rate cut cycle. Here’s my advice for you today: Think big by thinking small. Regards, Zach Scheidt for The Daily Reckoning [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) Editor’s note: We’re witnessing a historic rotation in the stock market. And it’s now set to accelerate after a huge announcement that came from the Federal Reserve this week. The Fed is finally preparing to cut rates. [This is the profit catalyst that microcap stocks were waiting for.]( Investor and entrepreneur James Altucher has been preparing for this moment for months. [And he just launched a new microcap research venture revealing his top plays.]( He narrowed down the world’s vast universe of 4,000 different microcaps… And found 5 elite stock recommendations capable of producing 1,000% gains in the next year. This research is very exclusive. And these stocks are small and are reserved for a small audience. Fortunes will be made over the next 12 months. And this could be your chance to claim yours. But these moves happen fast. If you wait any longer, you will miss out on one of the biggest stock market setups in decades. [Go here now for all the details.]( Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) [Zach Scheidt] [Zach Scheidt]( is the editor of Lifetime Income Report and Income on Demand — investment advisories dedicated to finding Wall Street's best yields. He brings to the table impeccable investment management experience and a solid record of identifying oversized payout opportunities. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your The Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@dailyreckoning.com. This address is for feedback only. 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