Rate Cuts Could Be Meaningful for Small-Cap ETFs

[ETF Daily News]( December 21st, 2023 [Rate Cuts Could Be Meaningful for Small-Cap ETFs]( Over the past month and the past 90 days, the Russell 2000 Index is higher by 12.07% and 8.49%, respectively. What’s notable about those periods is that they include increased chatter that the Federal Reserve could be positioning for multiple interest rate cuts in 2024. In other words, small-cap stocks are positively correlated to the concept of lower rates. That could signal opportunity with exchange traded funds such as the [Invesco NASDAQ Future Gen 200 ETF (QQQS)](. Before getting too excited about the prospects for small-caps in 2024, investors should acknowledge a few points. For example, rate cuts could be interpreted as the Fed being concerned about economic activity. That could weigh on smaller companies. The other side of the coin is more constructive for assets such as QQQS. Higher quality companies should be responsive to rate cuts. If Fed dovishness arrives with the economy still strong, the Invesco ETF could benefit. Macro Factors Could Help QQQS At least two areas could provide tailwinds for small-cap equities in 2024: supportive economic data and bullish earnings per share revisions. “From here it’ll be important to watch relative earnings revisions, high frequency macro data and small business confidence for signs that a more durable period of cap outperformance is coming,” noted Mike Wilson, chief investment officer and chief U.S. equity strategist [for Morgan Stanley](. “For now, relative earnings revisions remain negative for small caps and relative margin estimates have just recently taken another turn lower. Meanwhile, purchasing manager indices remain below the expansion contraction line of fifty and small business confidence remains low in a historical context and is yet to turn convincingly higher.” Other factors that could act as 2024 catalysts for QQQS include the current rock-bottom valuations on small-cap stocks that some market observers argue are making the asset class too compelling to ignore and an uptick in healthcare mergers and acquisitions. Those factors are relevant to an ETF that devotes more than half its weight to that sector. More broadly, ETFs such as QQQS can extend their recently… Continue reading at [ETFTRENDS.com]( NOTE: If URLs do not appear as live links in your e-mail program, please cut and paste the full URL into the location or address field of your browser. [Privacy Policy]( | [Terms & Conditions]( This email contains a paid advertisement.This is not a solicitation for the purchase or sale of securities. Readers are encouraged to conduct their own research and due diligence, and/or obtain professional advice, prior to making any investment decision. Advertisements and sponsorships are provided as a service to Stock News users. Stock News is not responsible for their content, services or products. The statements and opinions contained in this advertisement are not those of Stock News, and Stock News disclaims any liability for or arising from such statements and opinions. You are hereby advised that Stock News is receiving a fee as compensation for the distribution of this advertisement. [Click here to unsubscribe]( Copyright © 2023 ETF Daily News, part of StockNews.com - POWR Stock Rating, Market Outlook & Investment Insights Magnifi Communities, 1 Penn Plaza, Suite 3910, New York, NY 10019