📊 Rate Cut Hopes Rise

Good Morning Investors,

Softer December inflation data has increased near term expectations for rate cuts, which is supportive for smaller companies, but political risk tied to Federal Reserve leadership and ongoing policy headlines is keeping volatility elevated.

Sentiment toward small caps is split, with micro cap names leading gains year to date and some strategists constructive on small caps and financials, while others urge caution around technology focused small caps as investors reassess artificial intelligence spending and earnings durability.

Dispersion is likely to widen, favoring selective exposure to energy and resource names while requiring greater scrutiny within technology.

Matthias Schneider
Editor at Analytica Investor