Markets broadened beyond mega-cap technology shares this month, with the equal-weight S&P 500 outpacing the cap-weighted index and the Russell 2000 rising while the Nasdaq fell. Memory chipmakers helped semiconductors avoid the broader selloff even as oversupply concerns emerged. In his first meeting as Fed Chair, Kevin Warsh scrapped forward guidance and delivered a hawkish dot plot, though the market reaction was tempered by comments from seasoned Fed officials. Portfolio considerations address a record wave of equity supply, well-anchored long-term inflation expectations, and the potential for inflation relief as oil prices retreat from a ceasefire and the reopening of the Strait of Hormuz.
From the original report
Selected passages from the original publication. Historical observations reflect the report's publication date, not current market advice.
1) Markets Broaden Out – We have been waiting for markets to broaden out beyond a small group of tech shares. It happened (at least for this month), as the equal-weight S&P 500 outpaced the cap-weighted index by ~300bp, and the small-cap Russell 2000 rose 3.6% while the Nasdaq fell 2.8%. The Mag 7 shed over $2 trillion in their worst month in over a year, as funds rotated into industrials (+7.2%), healthcare (+6.5%), and financials (+4.2%).
2) But the Chips were not (yet) Down – Memory continues to be a “flash”-point (excuse the bad pun), as DRAM producers such as Micron (which surged 18.9% on strong HBM demand) helped semis avoid the Nasdaq selloff (the SOX Index gained 11.1%). The planned doubling of Korean production by Samsung and SK Hynix raised oversupply concerns, while price increases by Apple and Microsoft could hit demand.
3) Hawkish Debut? – In his first meeting as Fed Chair, Kevin Warsh scrapped forward guidance and delivered a dot plot showing a median 12.5bp of hikes for 2026. Markets initially priced 41bp through year-end; however comments from seasoned officials such as NY Fed President Williams softened the reaction, even as macro data remained solid.
Equity Supply Overhang – SpaceX’s record $75B offering was followed by Alphabet (which raised $85B in equity), Super Micro ($7B), and reports Meta is considering tens of billions in stock–the largest equity supply wave in years. SpaceX gained 67% from its $135/shr offering before selling off over 30%, leading OpenAI to potentially delay its IPO to 2027. This issuance pressure may weigh on broader equity returns.
Inflation Expectations – Fed officials (including Chair Warsh) often comment on how inflation expectations remain anchored. They do not lie! Below is a market measure of long-term expectations. It is notable that even during the deflationary depths of the pandemic and the inflationary scare of the recovery, expectations of long-term inflation have stayed contained: a sign of a well-functioning central bank.
For educational purposes only; not individualized investment, tax, or legal advice. Investing involves risk, including loss of principal.
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