), small-cap stocks are especially sensitive to interest rate changes. Historically, after the Federal Reserve implements rate cuts, all market cap sectors tend to rally, but small caps often outperform their larger-cap peers.
Earlier in 2024, small caps underperformed large caps because the expected rate cuts were delayed, resulting in a historically wide performance gap between the two. Small caps lagged, but now that rates have been cut by 50bps, the landscape could shift. Small-cap stocks' valuation remains relatively attractive, allowing investors to capitalize on a potential rebound.
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