Recent market volatility has been largely influenced by the Federal Reserve and expectations around interest rate cuts. Notably, the performance of large-cap stocks compared to small-cap stocks has been tied to these rate expectations.
Earlier this quarter, higher inflation led to fewer anticipated rate cuts, favoring large caps as small caps struggled with rising rates.
Now, with recent inflation easing more than expected expectations for rate cuts have increased again, leading to a shift back toward small caps. While this doesn’t alter our strategy, it’s a useful indicator of how market breadth could change with rate-cut catalysts.
Interest Rate Expectations Impact on Stocks
- We believe the preservation of capital is key to consistent, long-term investment success.
- Our investment approach is grounded in economic theory and backed by quantitative analysis.
- Managing drawdown risk is a pillar from which we build our portfolios.
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