📌 Reignited Tightening Expectations Worsen K-Shaped Divergence in US Equities
Previous expectations of a broad-based US equity rally driven by interest rate easing are being broken. As Federal Reserve officials once again signal rate hikes, US Treasury yields, crude oil, and the US dollar have rebounded in tandem, not only resetting macro liquidity constraints but also pushing the internal divergence of US stocks to a more extreme level.
Inflation Stickiness Drives Hawkish Pivot Chicago Fed President Goolsbee and Boston Fed President Collins have successively voiced firm stances recently. The core contradiction lies in the lack of substantive progress on inflation coupled with persistent supply shocks, especially as massive infrastructure investments in artificial intelligence data centers significantly drive up aggregate demand. If overheating aggregate demand outstrips supply capacity, the Fed is inclined to tighten decisively, with policy support even existing for a 25 basis point rate hike.
Micro Performance Moves Toward Polarization Rising interest rate expectations combined with a rebound in crude oil have forced different assets to bear entirely different costs:
- Large-Cap Tech Stocks Show Clear Resilience: Mega-cap tech stocks represented by the Nasdaq 100 show signs of desensitization to rate hike risks. QQQ has continuously rebounded from its rate-decision meeting lows and persistently absorbed concentrated capital, remaining largely insensitive to rate pressures in the short term.
- Small-Cap Stocks Endure Liquidity Squeeze: A strengthening US dollar and climbing bond yields have directly suppressed the performance of Russell small-caps. High financing costs leave small and medium-sized enterprises with weaker risk resilience bearing the brunt.
The resilience of broad market indices masks the ongoing deterioration in market breadth. Capital is concentrating further into large-cap tech stocks with healthy balance sheets and AI capital expenditure protection, while the broader landscape of small and medium-sized enterprises remains constrained by rising borrowing costs, intensifying the K-shaped divergence in US equities.
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