Market Action: Money Is Rotating Into Small-Caps
Markets ended mostly flat, apart from the Russell 2000, which was up 2.69% yesterday. This signals what could be a rotation out of the Nasdaq and the "Big 7" stocks, all of which are currently overbought. Small-caps have been left behind so far this year, and, with improving prospects of an economic soft landing, small-caps could see their time in the sun.
Given the major divergence between mega-cap tech stocks and small-cap stocks, we are likely to see a big pullback from market leaders or outperformance from smaller stocks as they catch up. This extremely narrow market rally has spread worry around, as only a handful of stocks have driven the market in 2023. If the gap gets closed, we could see a much healthier market in the back half of the year. The CBOE Volatility Index, the VIX, is at its lowest level since 2021; that could also support a "small-caps are catching up" narrative, making these stocks the next big trade.
Coinbase Faces a Pivotal Moment as U.S. Regulators Drop the Hammer
Coinbase Global Inc. (COIN) knew all along that it could be courting trouble with regulators, but that didn’t stop them from going public two short years ago and becoming one of the largest cryptocurrency exchanges in the world. Now, regulators are going in hot, barely 24 hours after coming after Binance. The SEC sued Coinbase for failing to register with the agency as a broker, an exchange, or a clearing firm. To be clear, Coinbase has consistently pushed for more comprehensive regulation, and they seem to have endeavored to follow rules, many of which develop on the fly, but they're still in a very precarious position and one which could have a very detrimental impact on the entirety of the cryptocurrency and digital assets sector.
It's the number one issue facing crypto right now. Chief Crypto Strategist Nick black, at the American Institute for Crypto Investors, dishes out his complete take on the SEC vs. Binance and Coinbase. Find out why why he believes Binance could give up on the U.S. market and what might happen to Coinbase.
EIA Continues to Raise its Oil Price Forecast
Saudi Arabia may have slashed its output, but the U.S. is on a different path. Yesterday the Energy Information Administration (EIA) predicted record-high oil output for 2023 and 2024. Along with output growth, they also increased its forecasts for retail gasoline prices even as West Texas Intermediate (WTI) and Brent traded lower.
While oil prices have been in a rut, down roughly 40% from highs last June, there are still plenty of investors who are bullish - they've keyed on Saudi Energy Minister Abdulaziz bin Salman’s language around bringing oil prices up. Garrett Baldwin, who's been trading oil stocks all year, has been focused on special situations like M&A in the Permian. He's had his subscribers moving alongside Warren Buffett’s Occidental Petroleum Co. (OXY) purchases, too, pocketing double-digit profit potential. Check out what he thinks of the Energy Select SPDR Fund (XLE) and OPEC’s weekend meeting.
