Russell 2000 Flashes Major Positive as Market Uncertainty Grows

There are some serious tailwinds that could help stocks further.

The Federal Reserve is easing. Unfortunately, I think it may be slow (it thinks jobs are better than they are and thinks that inflation is higher than it is). We’ve covered why we think it is wrong (the birth/death model is a chief culprit on jobs, and owners equivalent rent an issue on the inflation side). If the data comes in as I expect, we will get more rate cuts, sooner, than is currently priced in.

I also expect the administration to take efforts to keep 10-year yields and mortgage rates lower, above and beyond the Fed cuts.

The Big Beautiful Bill should help, especially on accelerated depreciation, if companies can be convinced to invest more broadly (i.e., not just on AI and data centers).

"Production for security" seems to be gaining traction (here and even abroad). We have seen investments and direct involvement in tickers like X (formerly U.S. steel), INTC (which I continue to own, though I took some profits last week) and MP (which I missed). Other names that have appeared on the radar are names like (UAMY) (antinomy) and LEU (uranium enrichment, which I own, but did take some profits — though no official announcement on this one).

This goes hand in hand with deregulation, which needs to be a focus and will be a further tailwind.

Against these tailwinds, uncertainty remains high.

For instance, there are evolving trade deals and tariffs. While we have settled into a smaller range on most countries, there remains a high degree of uncertainty.

The “investments” that other countries have promised seem very vague. If they materialize, they could be a big tailwind. But if they are smoke and mirrors, they will delay building out businesses.

Court rulings are still awaited on some of the tariffs.

China has a stranglehold on many processed and refined rare earths and critical minerals — a huge bargaining chip for them. The U.S. controls the best chips in the world, but China seems to be content to do without while trying to jumpstart their own tech and production. I hate to say it, but I still think China can continue to outperform, especially while there is no chatter about de-listing and many of the administration’s policies encourage a weaker dollar (FXI and KWEB are the choices for now, though I only own FXI and have sold down significantly in past couple of weeks — though I regret that).

India: friend or foe? This is a huge wildcard, and it seems like relationships are getting better? I think we need a real trade deal with India that works for both sides. We don’t really have that.

Executive orders: So much has been done by executive orders, that it is difficult to invest in projects that take years to plan, and maybe even decades to generate significant return on capital. That is holding back investment and growth.

The American brand: There is a lot of uncertainty of how things are “shaking out” globally given all the “disruption” that has occurred. It could be as simple as “let bygones be bygones” but there is concern that as the U.S. continues to push hard and occasionally be erratic (like the latest salvo on H1-B visas) that the world economy is slowly peeling away from the U.S.

Jobs and consumption: Consumption is the trickiest. It is clear the wealthy are still spending, though even there, there are signs that they are scaling back.

I like that the Russell 2000 IWM outperformed the S&P 500 and Nasdaq 100 last week.

That is, to me, a sign that the tailwinds are helping and we have the potential to break out of a very AI and data center driven investment and market driver environment. That would be positive.

I remain comfortable with yields and think they will drift lower out the curve and would not be surprised to see some announcements to help mortgage yields drop even further.

At the time of publication, Tchir was long INTC, LEU and FXI.