Happy Monday -- the start of the highly-anticipated "Fed Week." Later this week, America's central bank is widely expected to cut interest rates by a quarter point. The latest cut would bring the target rate to between 3.50% and 3.75%.
Traders have been anticipating the cut. Today, the small cap-focused Russell 2000 (+0.21%) is the only of the major indexes in the green, putting it up nearly 18% over the last six months on rate cut hopes. Investors have been betting on a Russell rebound, as many of the index's growth-focused firms are dependent on floating rate debt.
Lower rates might help the Russell 2000 catch up with large caps-focused benchmarks like the S&P 500 and Nasdaq Composite, both of which are down today by 0.43% and 0.26%. However, with just three quarter-point cuts expected for next year, it remains to be seen if lower rates will truly transform the fortunes of firms in the index -- over 40% of the index is unprofitable and much of its recent rally has come from speculative, "low quality" stocks.
Monday Reading:
But large caps might not be the kind of bet they used to be either, at least according to tech bull Ed Yardeni. This weekend, Yardeni moved Mag7 stocks like Microsoft and Apple to underweight, adding that growth from other firms might catch up the rest of the S&P 500 becomes like tech companies. The move marks the end of an era for Yardeni, ending a 15-year bias towards tech names.
In lieu of the tech-flavored names, the market veteran recommends tilting portfolios in favor of the index's health care, financials, and industrial names.
TurboTax Via TheStreet:
-- Noah Weidner, markets reporter
