Good morning to the smartest corner of the internet. Tech stocks just saw their worst day of the year, with semiconductor stocks and recent darlings all plunging.

It was the first time since 1999 that the S&P 500 fell more than 1% on the same day the Dow finished higher, the Wall Street Journal reported.

Today edition: The stock market’s sharp vibe shift, a look inside JD Vance’s portfolio, and the coming ether ETFs.

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How small-caps are beating tech

Whether you call it the Trump Trade or a rotation or rate-cut play, there is a shift happening in equities right now. 

Rarely does the stock market look resemble such a clear-cut, zero-sum game.

Investors of all sorts typically benefit from a broad and unrelenting rising tide. Yet over the recent trading sessions, small-cap names have emerged as the winning bet by a landslide. 

Big Tech, meanwhile, is having a rare showing of underperformance. 

This “I win, you lose” framing that began after the cooler-than-expected June CPI print is illustrated by the data.

The S&P 500 Information Technology sector is down 5.2 percent since July 11.

The small-cap Russell 2000 has moved 8 percent higher in the same stretch.

The stocks that make up the Magnificent 7 — Apple, Nvidia, Microsoft, Alphabet, Amazon, Tesla and Meta — have seen some $1.1 trillion in value wiped out in that stretch, according to data from MarketWatch. 

That batch hasn’t tanked like this since May 2022, when they collectively lost more than $1.2 trillion in a week. 

Some standout losses from Wednesday alone:

• Nvidia down 6.2%

• Meta down 6.0%

• Amazon down 2.8%

• Tesla down 3.5%

The tech-heavy Nasdaq, in turn, has fallen nearly 4 percent in the last five trading sessions.

Next to the Russell 2000’s rally, that’s good for the biggest performance gap between the two indexes on record, based on data going back three decades.

“It appears that investor ‘animal spirits,’ especially in the value trade, have taken on a whole new head of steam because of this growing feeling that Donald Trump is going to emerge victorious November 5,” David Rosenberg, president of Rosenberg Research, wrote in a note to clients Wednesday.

Increasingly, too, the odds are tilting in favor for a Republican sweep across the House and Senate.

In that scenario, corporate income taxes are likely to fall and businesses could benefit.

The backdrop to all this, of course, is the prospect of an imminent Fed rate cut.

Markets now see 100 percent certainty a cut is coming in September, according to CME data.

“No wonder investors are foaming at the mouth,” Rosenberg said.

Comments or feedback? Hit reply to this email or let me know on X @philrosenn.

*At a glance:

Elsewhere:

🏦Regional bank stocks rallied Wednesday. And Jerome Powell may be the reason why. The Fed is getting closer to cutting interest rates, and central bankers have made comments hinting in that direction to start the week. The KRE index, which tracks regional banks, has climbed 17% over the last seven trading days. (Yahoo Finance)

📉Global chip stocks tumbled amid geopolitical tensions. The Biden administration are reportedly weighing a clamp-down on companies that are exporting chip-making to China, while Donald Trump said Taiwan should pay the US for defenses. Nvidia, TSMC, AMD, Arm, Qualcomm, and Broadcom all tumbled. (CNBC)

💰️JD Vance has money in crypto, oil and VC. Trump’s new VP pick has vested interest in all three sectors. His latest personal financial disclosures included a range of venture bets like VR firms and app developers. Plus, he holds a sizable chunk of bitcoin. (Barron’s)

📈The small-cap rally could be short-lived. That’s according to strategists at Capital Economics, who told clients Wednesday that the recent market action shouldn’t be considered an official rotation. For them to be convinced, they said they needed to see much more of a Big Tech sell-off. (Business Insider)

Rapid-fire:

• Biden reportedly tested positive for COVID-19, and cancelled his speech in Las Vegas at the last minute (CNBC)

• Biden is embracing rent control, debt erasure, and court reform as he struggles to push his campaign ahead (Bloomberg)

• HSBC, Europe’s largest bank by market value, has just named Georges Elhedery as its new CEO (WSJ)

• Nearly one-quarter of homes on the market saw price cuts in June (Business Insider)

• A Trump-Vance economic agenda would include tax cuts, more tariffs, and a potential trade war with China (FT)

Last thing:

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