Wall Street is shifting its focus from mega-cap stocks to shares of small-cap companies, according to Marex Solutions; This is a move that could potentially fuel gains in the cryptocurrency market.
Nasdaq, which is Wall Street's technology-oriented index and consists of 100 stocks, including Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla, called the “magnificent seven” (Mag 7), has increased significantly since July 8. It showed little change and remained around 2,270 points. By contrast, the Russell 2000, a small-cap index, is up more than 12%, according to data from charting platform TradingView.
This trend shows that investors are moving their money out of the largest tech firms and into smaller companies that until recently have lagged the broader market. The Wall Street Journal attributes this new interest in small companies to cooling inflation and growing confidence that the Fed will cut its benchmark interest rate this year.
According to Ilan Solot, a senior global strategist at Marex Solutions, this sector rotation may be the most important macroeconomic factor for cryptocurrencies: “With the exit from Mag 7, money will look for other places to be deployed. Small caps will be the first to react, but I believe crypto will avoid this rotation.” I suspect you will benefit from it.”
Solot believes sector rotation could be particularly beneficial for Ethereum (ETH), especially with the upcoming launch of spot ETH ETFs. “ETH ETF could be perfectly timed as AI technology investors look for alternative themes,” added Solot.
*TradingView is a chart-based platform for trading individuals and investors interested in cryptocurrencies and specifically assets such as BTCUSD. This platform offers an environment to analyze the markets, keep up with current financial news and exchange ideas. Cryptocurrency users can conduct more detailed market research with the advanced tools and various data options offered by TradingView. In addition to detailed symbol charts, they also have access to a wide range of data, especially on how to use the economic calendar. The platform also aims to support users by providing them with more comprehensive data sets in line with their different strategies.
*This is not investment advice.