Twilio Inc. (TWLO)

We recently noted that market sentiment is all over the place, and there seems to be a divide between market professionals and individual investors. Today, we are again looking at sentiment, but in this case specifically the sentiment of corporate executives, directors, and beneficial owners (aka insiders).

Despite bursts of outperformance, small- and mid-cap stocks (SMID) have underperformed large-caps year to date -- as they have over the past five years. But they are edging closer to their large-cap rivals with a year-to-date return of 10%, just two percentage points below the S&P 500. As well, SMIDs may be in a better position to generate market-beating returns going forward. For one thing, SMID companies tend to focus on domestic markets, so their businesses could be less disrupted by trade and tariff issues, fallout from unrest in the Middle East, the Russian invasion of Ukraine, issues in China, or other geopolitical developments. As well, the prices of SMID stocks generally are lower than the prices of large-caps, with the P/E ratio on the Russell 2000 SmallCap Index at 17, compared to a trailing P/E of 25 for the S&P 500. Finally, there are long stretches in the record books when SMID stocks have outperformed large-caps. SMID risks do carry risk, but diversified investors look to have exposure to small- and mid-caps based on the long-term performance record.

The S&P 500 (SPX) broke out of its bearish channel on Monday morning and rallied hard all day. So the fire has been lit for a possible move to 8,000, despite horrendous market breadth and still-poor seasonals. While the last quarter of the year historically is the best, a mini blow-off here might throw a wrench into what the majority is parroting. Communication Services and IT did the heavy lifting on Monday, with semiconductors, telecom equipment, electronic equipment, and some software names spiking. The AI race seemingly is back on, with large gains from ARM, INTC, ALAB, MRNA, META, AMD, QCOM, P, DDOG, GLW, and MRVL.

While this week doesn't have the buildup of last week, there are some key happenings, including Friday's employment report. As well, Technology EPS continue to roll in with PANW, MDB, DELL, and CRDO reporting on Tuesday; AVGO, NTAP, SNOW, and HPE on Wednesday; and CIEN and ZS on Thursday. Software (IGV $109.50), led by cyber security and then cloud computing last week, has outperformed semiconductors (SMH) since late June. IGV gapped to recovery highs on Thursday with strong volume and is closing in on its September 2025 all-time high near $118. SMH remains in a correction as another strong report from Nvidia failed to reignite the former leaders.