As the earnings season approaches, the AI craze has cooled down recently, and tech stocks have been heavily sold off, with funds pouring into sectors with lower valuations. There have been widespread discussions about the rotation of the U.S. stock market. At the same time, as the prospect of a rate cut by the Fed becomes clearer, cyclically sensitive small-cap stocks, real estate, and industrial sectors have rebounded. In terms of product structure, the operating income of products worth 10-30 billion yuan is 401/1288/60 million yuan respectively.

Since July, the S&P 500 Index, of which the seven giants account for nearly 30%, has fallen by 0.44%, and the Nasdaq, represented by tech stocks, has fallen by 3.3%. On the other hand, the Dow Jones Index, dominated by value stocks, has risen by more than 4%, the S&P 500 Equal Weight Index, with a more evenly distributed stock composition, has risen by nearly 4%, and the small-cap Russell 2000 Index, representing small-cap stocks, has recorded an impressive increase of nearly 10%.

As technology giants collectively adjust, more and more stocks are rising in the US stock market, and the so-called sector rotation is gradually showing signs.

S&P and Nasdaq fall, who is quietly rising?

Under the scenario of both S&P and Nasdaq do poorly, the Dow Jones Index, as one of the "big three" indices of the U.S. stock market, has emerged with unexpected strong performance, while the S&P 500 Equal Weight Index, another version of the S&P 500 Index, has also risen strongly and is expected to match the performance of its market capitalization-weighted version for the year.

From the gainers list of Dow Jones and S&P 500 Equal Weight Index constituent stocks, it can be seen that no tech stocks have recorded significant gains since July, and funds have instead flowed into sectors such as real estate, industry, and medical care.

Among them, the American multinational comprehensive manufacturing company.$3M (MMM.US)$As it outperformed the day after its earnings release, it was the best performer of the Dow for the month, up over 24% throughout the month.$Mohawk Industries (MHK.US)$,$D.R. Horton (DHI.US)$,$CBRE Group (CBRE.US)$Related stocks in the real estate industry chain have also performed strongly and dominated the list.

As the pace of rate cuts progresses this year, the pressure on tech stock valuations is becoming increasingly enormous, and the market is beginning to play new opportunities, with industries that are sensitive to interest rates and the economy benefiting first. Data from the industry shows that after June's inflation data consolidated rate cut expectations, investors have invested nearly $6 billion in U.S. non-tech industry ETFs, while only $1.4 billion has flowed into technology industry ETFs. In addition to technology ETFs, the industries that are receiving capital inflows include finance, industry, utilities, medical care, and real estate.

The U.S. stock market style rotation has begun, where is the next opportunity?

The sector rotation has caused a seismic change in the U.S. stock market, but will this trend continue? Where can you find opportunities?

• Three major events: rate cut trading, earnings season, Trump trading.

In addition to the gradually clearer prospects of a rate cut, opportunities are also provided by the upcoming Q2 earnings season and the heat generated by Trump's trading in the U.S. election, which stimulate rate-sensitive stocks such as real estate manufacturers and small caps.

Bank of America strategist support, as inflation continues to cool, the Fed's focus will shift from suppressing inflation to supporting economic growth. As long as economic growth slows down, the Fed begins to cut rates, so this should be an almost perfect scenario for cyclical stocks in commodities, industry, energy, optional consumer goods, and some technology sectors.

Research firm Sevens Report Research points out that among the various industries in U.S. stocks, traditional energy (oil, natural gas, coal), pharmaceuticals, and finance are the easiest to rebound, as the expectation of Trump's election will reduce regulatory burdens. Concerns about trade protectionism (tariff increases) may harm some technology and manufacturing stocks, as well as some retail stocks, and the competitive edge of renewable energy sector will also be weakened.

• Top three indices: Dow Jones, S&P 500 Equal Weight Index, Russell 2000 Index.

Using the Dow Jones Industrial Average as an example, which represents value stocks and is the index that best reflects the US economy, its component stocks are mainly well-known companies in the US industry, which have performed well in recent sector rotations and many have gained market recognition in Q2 reporting season, such as medical care companies, financial companies, and chain consumer brands. Stocks like Visa, MasterCard, and other "Buffett's favorites" have recently hit new highs. If the breadth of the US stock market continues to rise, the outlook for the other 493 stocks in the S&P 500 index, excluding the Magnificent 7, may be even better in the second half of the year. At the same time, the S&P 500 Equal Weight Index and the ETF that tracks the index are gaining more attention on Wall Street. The S&P 500 Equal Weight Index has the same component stocks as the traditional S&P 500 index, but it does not allocate weights based on a company's market value. Instead, it calculates the weight of each stock equally, with each stock accounting for only 0.2% of the index. The Magnificent 7 technology giants account for nearly 30% in the traditional S&P 500, while in its equal-weighted index, they account for less than 2% combined. The valuation of the equal-weighted index is also more attractive, with a P/E ratio of 16 times, compared to the expected P/E ratio of 21 times for the market-cap weighted S&P 500 index. As it receives more attention, investors have poured money into the Invesco S&P 500 Equal Weight ETF. FactSet data shows that the fund has received nearly $11 billion in net inflows in the past 12 months and its size has grown to over $54 billion, on par with the inflows of the Magnificent 7 ETF.$UnitedHealth (UNH.US)$Medical care companies, financial companies, chain consumer brands, etc. have all seen increases in their post-earnings reports. Stocks like Visa, MasterCard, and other "Buffett's favorites" have recently hit new highs.$Goldman Sachs (GS.US)$If the breadth of the US stock market continues to rise, the outlook for the other 493 stocks in the S&P 500 index, excluding the Magnificent 7, may be even better in the second half of the year.mcdonald's (MCD.US) The S&P 500 Equal Weight Index and the ETF that tracks the index are gaining more attention on Wall Street.$American Express (AXP.US)$,coca-cola (KO.US) Stocks like Visa, MasterCard, and other "Buffett's favorites" have recently hit new highs.

If the breadth of the US stock market continues to rise, the outlook for the other 493 stocks in the S&P 500 index, excluding the Magnificent 7, may be even better in the second half of the year. At the same time, the S&P 500 Equal Weight Index and the ETF that tracks the index are gaining more attention on Wall Street.$Invesco Exchange Traded Fd Tr S&P 500 Equal Weight Etf (RSP.US)$The S&P 500 Equal Weight Index and the ETF that tracks the index are gaining more attention on Wall Street.

The S&P 500 Equal Weight Index has the same component stocks as the traditional S&P 500 index, but it does not allocate weights based on a company's market value. Instead, it calculates the weight of each stock equally, with each stock accounting for only 0.2% of the index. The Magnificent 7 technology giants account for nearly 30% in the traditional S&P 500, while in its equal-weighted index, they account for less than 2% combined.

The valuation of the equal-weighted index is also more attractive, with a P/E ratio of 16 times, compared to the expected P/E ratio of 21 times for the market-cap weighted S&P 500 index.

As it receives more attention, investors have poured money into the Invesco S&P 500 Equal Weight ETF. FactSet data shows that the fund has received nearly $11 billion in net inflows in the past 12 months and its size has grown to over $54 billion, on par with the inflows of the Magnificent 7 ETF.$SPDR S&P 500 ETF (SPY.US)$The inflow amount is about the same.

The Russell 2000 Index, composed mainly of small-cap stocks (ETF for e-mini Russell 2000 Index), has shown signs of recovery, surging nearly 10% since July. Morgan Stanley strategists say that historically, when the Fed begins cutting interest rates, growth-oriented small-cap stocks usually outperform the large-cap index. The growth rate of their earnings is expected to have a positive impact. Some analysts predict that small-cap stocks will see a 27% growth in profits this quarter compared to the same period last year and a 67% growth in the next quarter. This growth rate is significantly faster than the expected growth rate of those heavyweight companies.$iShares Russell 2000 ETF (IWM.US)$The Russell 2000 Index, composed mainly of small-cap stocks (ETF for e-mini Russell 2000 Index), has shown signs of recovery, surging nearly 10% since July.

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