Strong corporate earnings have helped stocks notch repeated record highs in 2024, despite stubborn inflation forcing investors to dial down their expectations for how many times the Fed will cut rates this year. But cooling inflation data in recent weeks has led Wall Street to bet that the Federal Reserve will finally cut interest rates in September — and that there are now more options for gains beyond just the Big Tech stocks that have dominated the market this year.
Smaller stocks prevail One area that has benefited recently from the prospect of lower rates is small-cap stocks. Shares of smaller companies tend to perform poorly when rates are high, since they have more floating rate debt than their larger counterparts. But they have historically tended to perform well when the Fed begins easing its high borrowing rates. The Russell 2000 index, which tracks the performance of small-cap stocks, has gained 10.