From Nasdaq.:



The article discusses how there has been an inflection point for financial markets in October, with soft inflation data leading to a change in consensus that the Fed’s next move is more likely to be a rate cut rather than a hike. This has resulted in small-cap stocks experiencing significant gains, with the Russell 2000 up 12.1% over the last 90 days. However, the future outperformance of small-cap stocks depends on variables such as inflation, GDP, and earnings revisions. The potential for continued gains also depends on whether inflation can continue to moderate without the economy tumbling into a recession. Additionally, the article mentions that rate cuts are often necessary due to a weakening economy, and so the potential for small-cap outperformance to continue relies on GDP reaccelerating and inflation stabilizing at current levels. Therefore, while small-cap stocks are currently experiencing significant gains, their future performance is contingent on various economic factors, including the possibility of a Fed rate cut next year.



Original: Small Cap ETFs Gaining on Prospect of Rate Cuts in 2024