- Prediction markets currently point to no U.S. interest rate cuts in 2026, although expectations remain highly sensitive to incoming economic data.
- Gold sentiment has become deeply pessimistic, a condition that has historically been followed by stronger longer-term returns.
- Technology and semiconductors are losing momentum, while financials, healthcare, industrials and materials show signs of improvement.
Investors watch rates, gold and sector rotation
Interest-rate expectations remain unsettled as investors assess whether the Federal Reserve will hold steady through the end of the year — or potentially return to rate hikes if inflation and economic data remain firm.
In this week’s Markets in Motion, Bruce Campbell examines prediction-market and Bloomberg data showing little expectation of a rate cut at the July meeting. While most investors currently expect no cuts this year, Campbell stresses that the outlook remains dynamic and could shift quickly as new data emerges.
This article is being disseminated on behalf of Stonecastle Investment Management, a third-party issuer and is intended for informational purposes only.
Gold is also returning to the conversation. Sentiment Trader data suggests investor optimism toward the precious metal has fallen to unusually low levels. Historically, similarly pessimistic readings have been followed by improving probabilities of positive returns over three-month, six-month and one-year periods.
That does not confirm an immediate recovery, but Campbell argues the current setup is becoming increasingly interesting for longer-term investors.
Sector rotation is also continuing beneath the surface. Technology has moved toward the weakening quadrant, joining semiconductors, while financials and healthcare continue to improve. Industrials are also beginning to strengthen, and materials are showing early signs of renewed momentum.
Gold equities, represented by the GDX ETF, have started to turn higher. However, Campbell says they would need to move decisively toward market leadership before the rotation can be considered fully confirmed.
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