A Wild Ride and More 'Stunning' Rotation Amid Greenland, Tariff Diplomacy
The Russell 2000 led the pack again while Fed, political and big earnings catalysts loom.
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It was day 14 of Russell 2000 (IWM) outperformance over the S&P 500 (SPY) , but the story of the day was the series of big swings following news regarding Greenland and tariffs. President Trump’s speech at Davos helped create some early strength, but that faded on skepticism before Trump released a subsequent statement announcing he was halting new tariffs on Europe due to an agreement to negotiate a Greenland deal.
After a triple intraday reversal, stocks concluded the day with about 70% of names in the green and a very impressive 425 new highs. The Russell 2000 led the pack again with a gain of around 1.9%. All the other indexes and the Magnificent Seven (MAGS) were up approximately 1.2%.
What is most interesting is that the Russell 2000 is at a new all-time high, while the Mag 7 remains down 7.85% from the all-time high it reached back on Oct. 29, 2025. It has been a stunning rotation, yet it has received very limited attention from the business media.
Looking Ahead: The Fed and Political Catalysts
So, now what?
There is a Fed meeting coming up next week, and Trump is expected to name a new Fed Chair at any time. These events are going to create movement.
Bonds (TLT) bounced back energetically on Wednesday, which is a good sign. While it is very unlikely that the Fed will make a move at its next meeting, the market is likely to react favorably if Trump names a dovish Chair.
Earnings Season and Individual Stock Picking
The main event for the next couple of weeks will be earnings. I discussed this morning that I’m trading Roku (ROKU) ahead of its upcoming report, and there are many others offering similar opportunities. I’ll be looking to adjust the positions of the stocks I own before the reports hit.
The volatility we are seeing can be very tough to trade short term, but it does offer opportunities to position for upcoming earnings announcements.
Bears looking for a market top are focusing too much on the indexes and not enough on individual stocks. There is some great stock picking available right now, despite the mediocre action in the Mag 7.
Have a good evening. I’ll see you Thursday.
At the time of publication, Rev Shark was long ROKU.
