In a series of interviews around this week’s Republican convention, Trump set out several of his policy priorities around tax cuts, tariff rises and foreign policy.
The most jarring comment overnight was his assertion that Taiwan should pay for its own defence – which knocked Taipei’s benchmark index down about 1% – but it’s just one of series of policy directions that’s starting to feed market pricing.
Taiwan’s chipmaking giant TSMC plunged 3%, the wider Taipei benchmark was down about 1% and chip stocks elsewhere were knocked back. Gold prices rose.
Caught in the slipstream of this chipmaker hit and the week’s Wall St rotation, global megacaps such as Nvidia are set to fall for the third day.
It’s a different picture for small caps, however.
The Russell 2000 index of small caps soared 3.5% on Tuesday – its fifth straight day of gains greater than 1%, its longest winning streak since April 2000 and its highest level since January 2022.
Jumping more than 10% over the past week, the index of mostly domestic-facing smaller business is now up almost 12% for the year to date – narrowing the gap with the S&P500’s 19% for 2024 so far and the 21% rise in the Nasdaq 100.
Adjusting for the outsize weightings of the megacaps, the equal-weighted S&P500 is now up almost 9% for the year.
And futures suggest the Russell will hold those gains later.
The gist of the argument behind the shift to better valued small caps from the pricy tech bellwethers is both stepped up interest rate cut speculation but also the tax, tariff and reshoring lean of a possible Trump return – now that his lead in betting markets for November win has surged to more than 70%.
That home bias has been absorbed pretty well across the board by the big stock indexes so far, with the S&P500 also up marginally to new highs on Tuesday.
