Market Analysis: Is the rotation trading of US stocks in July coming to an end?

On July 22nd, Jinshi Data reported that this month, the sharp rotation from large-cap tech stocks to lagging stocks has been a significant feature of the U.S. stock market. However, this initial phase of excitement seems to be giving way to a question: Can this trend continue? Jason Draho, Head of Asset Allocation for the Americas at UBS Global Wealth Management, said, ‘This trade is more likely to reverse than to continue.’ He said that for this trade to continue, the ideal macro drivers that support it - a rise rate of 2% or higher, declining inflation, and preemptive rate cuts by the Fed - must continue. Although recent data in this regard is ‘encouraging,’ he also pointed out that investors may be too optimistic about the expected rate cuts by the Fed. Draho believes that if the rise and/or inflation continue to exceed 2%, the Fed may only cut rates a few times and then pause, ‘which could be enough to pause the rotation trade even if the trend does not reverse.’