The Russell 2000 (^RUT) small cap index was edging lower Tuesday morning as the index has moved nearly 3% lower over the past five days (at the time of this video’s posting on Tuesday). As Wall Street investors and retail traders have shifted in and out of the tech trade, in preference to small caps, are there more catalysts on the horizon to push this trend even further? Glenmede VP of Investment Strategy Mike Reynolds finds there to be two major tailwinds for the small-cap market: fairer valuations and earnings growth expectations ahead of 2025. “Going into 2025, we’re expecting some pretty meaningfully better, better [growth] results. Twenty percent-plus, whether you’re looking at the Russell 2000, the S&P 600 (^SP600) versus closer to 10% for the S&P 500 (^GSPC),” Reynolds explains to Seana Smith and Madison Mills. “This comes after a period of a couple of years where small caps are just pretty serially under-earned relative to their larger counterparts. And we think there’s a catch-up here, we think we’re starting to see the early signs of it.” Reynolds points out small caps are more “underpinned” by the Federal Reserve’s monetary policy and the interest rate environment. “We expect the Fed is going to be less aggressive on the rate cut campaign going forward than perhaps we had expected just a month or two ago. But the fact of the matter is, we think that Fed funds is still, on a real basis, materially too tight,” Reynolds tells Yahoo Finance. “Now, does it mean we get to neutral within the next couple of months? Probably not. But we think the fed is going in that direction. Investors that sort of have the patience to play this over the longer term, we think, are really going to be rewarded here.”
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He said nothing. lol. Useless.