Yesterday, the United States released several more data. The monthly rate of commercial inventory in the United States in May was 0.5%, expected to be 0.4%, and the previous value was 0.30%. This data is the largest increase since August 2022; the US NAHB housing market index in July was 42, expected to be 43, and the previous value was 43. This data is the lowest since December 2023.

Both data are bullish for the precious metals market. The probability of a rate cut in September is now close to 100%. With good data and Powell's dovish tone, a rate cut seems to be a done deal.

Affected by the optimism of the Fed's rate cut, the market's preferences have changed significantly recently. The Russell 2000 index, represented by small-cap stocks, has risen 12% in the past five trading days, a performance that has never been seen since April 2020, while the S&P 500 index has only risen 1.6% during this period, and the Nasdaq 100 index, which is dominated by technology stocks, has fallen 0.3%.

In fact, small-cap stocks have not performed well this year. Even with the recent rebound, the Russell 2000 Index has only risen 12% this year, dwarfing the 19% increase in the S&P 500.

Now, driven by the expectation of interest rate cuts, the earnings prospects of small-cap stocks have also begun to improve, because smaller companies are generally more sensitive to high interest rate costs and their debt burden is heavier than large-cap stocks.

For the current stage of US stocks, we analyze the reasons and there are two situations that will cause a decline: one is that the data released later is not conducive to interest rate cuts, and the other is the occurrence of a black swan event with greater risks.