“The time has come for policy to adjust”.
That short sentence was the essence of Fed Chair Powell’s speech at Jackson Hole on Friday confirming that rates cuts will soon be in hand. With that bond rates went lower and stocks soared. In particular smaller, Risk On stocks.
What does that mean for your investing plans in the months ahead?
Answering that will be at the heart of this week’s Reitmeister Total Return commentary.
Market Outlook
Large caps have led the market for the past 4 years. That sounds just fine until you realized that is not the historical norm.
Going back to 1926 we see that the average annual return for the large stocks is 9.77% while small caps enjoy a heartier 11.57% return. That less than 2% advantage doesn’t sound like much until you appreciate the benefit of compounding interest like in this chart below:
This is a pretty compelling case for small cap stocks as the superior investment class over time. And thus a wakeup call that the last 4 years with large caps in the lead is not the norm...and likely not going to hold up much longer.
Friday’s Risk On rally was another attempt to try and right that wrong with the Russell 2000 leaping ahead +3.19% on the session far outpacing the S&P 500’s (SPY) +1.15% return.
I suspect we will see more of the same action in the weeks and months ahead as large caps as a group are pretty fully valued. Thus, we should see a rotation to smaller stocks (including mid caps) through the rest of the year and into 2025.
At this stage I think investors are mostly holding their breath to see what the Fed does at their next meeting on 9/18. It is a forgone conclusion that rates will finally be cut. But...
Will it be 25 or 50 basis points?
What will be the pace of cuts in the future?
Where will rates be end of the year?...or a year from now?
The hope is that we get some color commentary on this from Powell at the press conference on 9/18 which gives a sense of how much accommodation is on the way...and how soon it will benefit GDP and earnings growth...and thus how it affects our investment plans.
I shared my investing game plan in vivid detail on a recent webinar. I highly recommend you check it out now:
In essence I am advocating a Risk On investing plan that is in many ways the antithesis of what worked in the early stages of this bull market.
This plan is working out stellar this year with an ample outperformance of the overall market. And really hitting the gas pedal of late.
You can get more specifics on my favorite stocks & ETFs in the section below...
What To Do Next?
Discover my current portfolio of 11 stocks packed to the brim with the outperforming benefits found in our exclusive POWR Ratings model. (Nearly 4X better than the S&P 500 going back to 1999).
All of these hand selected picks are all based on my 44 years of investing experience seeing bull markets...bear markets...and everything between.
And right now this portfolio is beating the stuffing out of the market.
If you are curious to learn more, and want to see my 11 timely stock recommendations, then please click the link below to get started now.
Steve Reitmeister’s Trading Plan & Top 11 Stocks >
Wishing you a world of investment success!
SPY shares were trading at $561.69 per share on Tuesday afternoon, up $0.90 (+0.16%). Year-to-date, SPY has gained 18.92%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.
Time to Buy Small Cap Stocks! StockNews.com
