S&P 500 at 5,642. VIX at 19.4. DXY at 99.2. Gold at $3,452. Russell 2000 up 2.8% on the week versus Nasdaq up 1.1%.
That last line is the one that matters this week.
Fed Held — No Surprise, Some Nuance
The FOMC delivered exactly what the market expected on Wednesday: rates stay at 4.25–4.50%. The statement was nearly a copy-paste from March — "inflation remains elevated," "labor market remains solid," "committee is attentive to risks on both sides." Powell's presser added nothing new. That absence of surprise was itself the message.
The one thing worth noting: the committee dropped a phrase that appeared in the March statement about inflation "making progress toward" the 2% target. That language is gone. Whether that signals a more cautious tone or just editorial cleanup is debatable — but bond traders noticed, and the two-year yield ticked up 4bps in the hour after the statement dropped.
I was not expecting a pivot signal. I did not get one. Position unchanged.
DXY Under 100: A Real Move
The dollar story is more interesting. DXY broke below 100 on Thursday for the first time since late 2023 and closed the week at 99.2. This is a 6.8% decline from the January high of 106.4. That is not drift — it is a trend.
The drivers are familiar at this point: the market is pricing in Fed cuts ahead of other G10 central banks, the trade-deficit widening is putting structural pressure on the current account, and dollar-denominated commodity demand is shifting. The correlation that matters here is gold — and gold responded exactly as you'd expect, holding near $3,450 even as equity volatility picked up. Crude oil held at $79 despite some inventory noise mid-week. A weaker dollar provides a natural floor under commodity prices.
I remain positioned for continued dollar weakness via EM equity exposure. Nothing changed this week on that front, but the breakout below 100 strengthens the thesis technically.
Small Caps: Finally
The number I've been waiting to see: Russell 2000 up 2.8% for the week, Nasdaq up 1.1%. That is the first meaningful small-cap outperformance since February.
The logic for small caps in a falling-dollar, falling-rate-expectations environment is straightforward. Small-cap companies are more domestic-revenue-oriented — they don't benefit from dollar translation tailwinds, but they also don't get hurt when the dollar weakens the way multinationals do. And critically, small caps carry proportionally more floating-rate debt. When the market prices in Fed cuts — even distant ones — the refinancing discount that has been crushing smaller balance sheets starts to lift.
Is this the start of a sustained rotation? I don't know. The IWM weekly chart shows a decent break above the 200-day moving average for the first time since February, but one week does not make a trend. I'm watching for a second consecutive week of outperformance as confirmation.
What I Did This Week
I trimmed roughly 8% of my Nasdaq exposure on Tuesday, before the Fed decision. Not a tactical call against tech — more a sizing decision. After the run from early April lows, the Nasdaq weighting in my equity book had drifted to about 38% of total equity. I want it closer to 30%. The proceeds went into cash, which I'm holding as optionality.
Gold: no change. I hold 8% and I'm comfortable there. $3,450 is not a compelling entry point to add. I would look at adding near $3,300 if we see a drawdown on a stronger-than-expected data print next week.
Crude: no position directly. I watch it as a macro thermometer.
What I'm Watching Next Week
Two data points dominate:
CPI Wednesday, May 13. Consensus is expecting 3.2% headline, 3.5% core. The May print is complicated by base effects — last May was when the first wave of tariff-related goods inflation hit the data. If the number comes in soft (below 3.0%), rates fall, dollar falls further, and the small-cap rotation gets more fuel. If it comes in hot (above 3.4%), all of that unwinds quickly and the Fed's "higher for longer" narrative resurfaces. This is the single most binary data point for the market right now.
Retail sales Friday, May 15. April consumer spending data. The March number was weak — down 0.5% month-over-month. If April comes in negative again, the soft-landing thesis starts to crack. I want to see at least flat-to-slightly-positive to maintain confidence in the base case.
I'm positioned, watching, and not rushing into anything before Wednesday.
— R.A.