The market is holding its breath this week as traders await two critical pieces of employment data: the ADP private payrolls report and the Bureau of Labor Statistics’ unemployment numbers.
These reports are more than just statistics; they are the tea leaves investors hope to read before the Federal Open Market Committee (FOMC) meets to decide the fate of interest rates.
Most analysts expect the Fed to cut rates, but there’s a growing possibility they may delay action until next month. That hesitation could be enough to rattle investors who have already priced in a more dovish stance.
The Fed’s decision will hinge on whether the labor market shows signs of cooling — a weaker jobs report would strengthen the case for a cut, while resilient employment could justify waiting.
For growth and technology stocks, a rate cut would be like rocket fuel.
Lower borrowing costs make it easier for these companies to expand, innovate, and justify their lofty valuations. The Nasdaq, in particular, could see a surge if the Fed delivers.
But here’s the catch: if the Fed holds off, small-cap growth stocks could be the most vulnerable. These companies often rely heavily on financing, and higher rates squeeze their margins faster than their larger peers.
Notice the difference in Tuesday’s midday action. The Nasdaq 100 (QQQ) is working on seven bullish days in a row. By comparison, the Russell 2000 (IWM), has seen sellers take control in the past two sessions.
This dynamic sets up a fascinating divergence.
On one hand, mega-cap tech firms may continue to attract capital even in a higher-rate environment, thanks to their strong balance sheets.
On the other hand, small-cap growth could face a double whammy: rising costs and investor flight to safety. It’s a reminder that not all “growth” is created equal.
Investors should also keep in mind that the Fed’s messaging matters as much as the decision itself.
If policymakers hint that a cut is coming soon, markets may rally even without immediate action. Conversely, if the tone is hawkish, expect volatility to spike.
That’s why Venture Traders don’t look to rely on what the Fed will or won’t do, but rather what trades can benefit from the fluctuation along the way.
Right now, we are watching for setups in GPCR and GDYN. These trades aren’t ready to fire off yet, but they are nearly there, so keep watching for the signals.
For longer-term investors, consider balancing exposure: overweight quality tech names that have strong cash flows, while being cautious with small-cap positions until the Fed’s path is clearer.
As always, the market has a way of humbling even the most confident predictions. Remember, the Fed doesn’t exist to make traders happy — though sometimes it feels like they enjoy keeping us on edge.
Stay nimble, stay disciplined, and keep your eyes on the data.
As always, if you have any questions, send them our way now at: [email protected].
Regards,
Coach Lincoln & Gordon Scott
Venture Trader