The exodus from mega-caps is the major U.S. equity market story recently, but it hasn’t translated into any kind of outperformance from small-caps. Developed markets in both Asia and Europe gained on both an absolute and relative basis last week as the pullback in U.S. mega-caps resulted in some rotation into alternative asset classes.
Better than expected jobless claims on Thursday coupled with a surprisingly strong jobs report on Friday have given some investors the feeling that, while loose conditions will remain in place indefinitely, they may not be getting looser in the short-term as many had hoped.
The biggest short-term storyline is the relationship between the U.S. and China. Both sides, for the time being, appear committed to fulfilling the terms of the phase one trade agreement. If that remains the case, the threat of tariffs is probably off the table in the near-term. If one of the two sides begins balking, we could see frequent targets, such as Huawei, see renewed sanctions.