Technically, we already saw this in 2005, since the SP 500 up 4.91 slightly beat the Russell 2000 up 4.55. But now in 2006, we are seeing a migration to large caps and mega caps. Some of this rotation is due to an expected slowdown in overall corporate profits. During such an environment, investors are more comfortable with large-cap companies, which are stable and more consistent in performance.
More Quotes from John Augustine:
Overnight, you saw good news coming out of the tech sector and we suspect they are good harbingers of things to come out of the earnings season for the next couple of weeks.John Augustine
It seems the storm is not going to be as strong as we feared and that was enough to take some of the selling pressure off stocks today. We are not likely to see real stock-buying this afternoon as most investors still want to see what happens with the storm during the weekend, but if damage is minimal, we might be bound for a rally on Monday.
John Augustine
Earnings are driving the testing of the top end for the SP 500, but geopolitical issues are here to stay for some time. That will put downward pressure on the stock market.
John Augustine
If the economy is as strong as the Fed is worried about, that's going to mean better corporate earnings. The driver is rotating from front-end consumer to back-end business spending. And business spending is being driven by the need to continually improve productivity, which brings in tech spending.
John Augustine
Big institutions are holding back their own capital. They're looking for an upside catalyst for stock prices. Any activity on the mergers and acquisition, buy-back or dividend fronts, mixed with good news out of energy or the Fed, would be a catalyst to bring the big institutions back into stock market.
John Augustine
There are fears that any supply disruptions could disturb oil markets and such concerns are holding back both economic growth and stock prices. In the absence of any such disruptions, we expect that crude will stay in the 50-70 range this year and will likely always be on investors' minds.
John Augustine
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