Many stock strategists began the year harping for a rebound in small-cap performance as consensus believed the Federal Reserve would begin reducing interest rates in the first half of 2024. Now, with the market scaling back its hopes for interest rate cuts this year, the small-cap Russell 2000 Index (^RUT) is down nearly 3% year to date, underperforming the S&P 500’s more than 5% gain this year.
“We think the Russell 2000 could be a bit challenged in the near term until we get to kind of greater confirmation of inflation slowing and greater confirmation that, OK, the Fed is going to be able to start cutting rates,” Bank of America head of US small- and mid-cap strategy Jill Carey Hall told Yahoo Finance.
After recent conversations with investors, Hall said the main catalyst for small caps to move higher is more clarity on the Federal Reserve’s interest rate path.
Market consensus has shifted to projecting two rate cuts this year from…
