Anticipated interest rate cuts have boosted US small-caps

As predicted in our latest analysis of cattle in January, live cattle have been a steady performer in 2025. Year-to-date, LC futures have increased by 25%, rising to 31% year on year. One of the main contributing factors is the contractionary stage of the cattle cycle, which can last between 10 and 14 years. Combined with the threat of New World screwworm, which is currently experiencing an outbreak in Mexico, stable demand is meeting fragile and slipping supply. However, seasonality could dampen futures prices during the colder six-month period ahead.

As previously mentioned, cattle farming is now more efficient than ever. On average, cattle live for 468 days, compared to 609 days in 1977. Additionally, the average carcass now yields 28% more beef, meaning the same quantity of beef can be produced using 69.9% fewer animals and 81.4% less feed. The cattle cycle, which usually lasts ten years from peak to trough, aligns with previously observed contraction cycles. In practice, this means that the size of the national cattle herd is shrinking. It is likely that this cycle is nearing its end, with producers retaining more heifers to increase herd size. However, it will take time for these effects to manifest and impact the balance of supply and demand.

Over a shorter timeframe of around a year, cattle prices display a seasonal effect. Due to when beef is usually consumed, cattle prices tend to peak in late spring and early summer. In other words, prices increase in line with the frequency of barbecues. Consequently, during autumn and winter, prices fall in favour of pork and ham, which are often consumed in Christian countries during the holiday season. However, this seasonal pattern is also influenced by long-term factors, such as changing demographics and customs. According to the latest 'Cattle on Feed' report from the U.S. Department of Agriculture, July placements were 6.11% below last year at 1.598 million head. Marketings were down 5.71% at the same time, and on-feed inventory was down 1.56% at 10.922 million head. Consequently, beef storage was also lower year on year. The reduced supply is further exacerbated by the outbreak of New World screwworm (NWS) in Mexico. Although there was some border tension last year as well, the recent outbreak caused the border to close in May. Meanwhile, the U.S. Department of Agriculture has announced plans to build a facility to produce sterile flies. As NWS is caused by parasitic flies whose larvae feed on warm-blooded mammals, this could impact the disease's ability to re-enter the USA and cause damage to livestock herds.

Overall, although Trump tariffs could impact the situation at any time, futures prices have been steadily increasing for a while now. Factors contributing to the steady increase in prices include BBQ season and strained supplies, among others. However, it is not certain that prices will continue to rise over the remainder of 2025. In fact, many factors could cause prices to fall. Thus, one could speculate that Live Cattle prices will start to taper off as a colder autumn and winter months are expected, as the cattle cycle draws to a close and initiatives for NWS management are put into place.

On Friday August 22, the U.S. stock markets saw a sharp rise. Jerome Powell's speech in Jackson Hole was well received. The small-cap Russell 2000 index performed the strongest, rising by 3.9%. Powell indicated that the Fed may need to act due to the weaker labour market. The likelihood of a 25-basis point interest rate cut at the upcoming monetary policy meeting increased from 75% before the speech to between 85 and 89% afterwards.

This week, all eyes are on NVIDIA's quarterly report on Wednesday 27 August and U.S. Personal consumption expenditures inflation data on Friday 29 August. On Wednesday, 27 August, interim reports from the U.S. companies NVIDIA and CrowdStrike are expected. Today's macroeconomic agenda is short and begins with the release of Chinese industrial company earnings for July. This is followed by the release of Germany's GfK consumer confidence figures for September. From the U.S., we will receive the weekly oil inventory report from the Department of Energy.

On Thursday, 28 August, the Swedish companies Elekta and Lundbergs, as well as the U.S. company Dell Technologies, are scheduled to release their quarterly results. The day will begin with the release of Sweden's July trade balance. This will be followed by the publication of the National institute of economic and social research (NIESR), August Swedish business survey. The Eurozone's August business survey is also expected. The U.S. will release Q2 Gross domestic product figures (second reading), initial jobless claims, pending home sales for July and the Kansas City Fed index for August.

On Friday August 29, the macroeconomic agenda will begin with the publication of Japan's July unemployment, industrial production and retail sales figures. A few hours later, Sweden will publish its July retail sales figures and its Q2 Gross domestic product (GDP) figures. Germany will publish its retail sales and import prices for July, as well as its Consumer price index (CPI) and unemployment figures for August. France will also release its CPI figures for August and GDP figures for Q2. Spain and Italy will release their August CPI figures, with Italy also releasing its Q2 GDP figures. Turning to North America, Canada will release its July GDP figure, while the US will report on private consumption and inflation (PCE), the goods trade balance (see graph below) and wholesale inventories for July. Furthermore, the United States will release the Chicago Purchasing managers index and the Michigan index for August. Alibaba is scheduled to announce its Q2 2025 results on Friday.

The S&P 500 remains in a strong uptrend. It is currently trading above all major moving averages and within a rising channel. Support is provided by the MA20, which is currently at 6,391. This is followed by the trend line, the MA50, and 6,290. Recent price action shows resistance near 6,475, with signs of slowing momentum as indicated by bearish MACD divergence. While the broader trend is bullish, the rally appears to be losing momentum, making short-term consolidation or a modest pullback more likely. A break above 6,475 would reinforce upward momentum.

The NASDAQ-100 remains in an uptrend, but momentum is weakening. A bearish MACD divergence creates a risk of short-term consolidation or correction. Strong resistance is found at 23,425. The next support levels are found at around 23,000, 22,645 and 22,150. Conversely, a decisive break above 24,000 would signal renewed strength.

In Europe, the DAX index remains in a long-term uptrend, sitting above all major moving averages, but it is currently consolidating within a trading range between 24,000 and 24,550. Failures to break above the 24,550-resistance level highlight the challenges of moving upwards. Therefore it is important to keep track of the support levels at 24,000, the rising trend line, MA100 and 23,365. Overall, the index is range-bound with short-term downside risks. A move below 24,000 could trigger further corrective pressure, whereas a breakout above 24,550 would be required for the prior rally to resume.

The OMXS30 index is still in a strong short-term uptrend, trading above its EMA9, MA20 and MA50 within an ascending channel. Overall, the technical outlook is bullish. However, although the MACD remains positive, it is flattening, which hints at slowing momentum. Meanwhile, resistance is emerging around 2,700, with a further key level near 2,760. This suggests a possible period of consolidation. Strong support levels are found at 2,650 and 2,570, with additional support at 2,500.

EMA 9: 9-day exponential moving average

Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence in which each successive number is the sum of the two previous numbers.

MA20: 20-day moving average

MA50: 50-day moving average

MA100: 100-day moving average

MA200: 200-day moving average

MACD: Moving average convergence divergence