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Despite bursts of outperformance, small- and mid-cap stocks (SMID) have underperformed large-caps year to date -- as they have over the past five years. But they may be in a better position to generate market-beating returns going forward. For one thing, SMID companies tend to focus on domestic markets, so their businesses could be less disrupted by the trade and tariff debate, or fallout from unrest in the Middle East, the Russian invasion of Ukraine, issues in China, or other geopolitical developments. As well, the prices of SMID stocks generally are lower than the prices of large-caps. Finally, there are long stretches in the record books when SMID stocks have outperformed large-caps. SMID stocks can be risky, but despite those risks, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 20% of the U.S. stock market's capitalization is comprised of SMID stocks.

The Fed's favorite inflation indicator, the PCE Price Index, will be released by the BEA this morning. The index differs from the better-known Consumer Price Index as its composition is changed more frequently and it is quicker to reflect real-time pricing fluctuations. In the January report, PCE inflation grew 2.5% year over year. The latest CPI report (February) had inflation rising 2.8%. Core PCE, which removes volatile food and energy prices, rose at a rate of 2.6% in the latest month. Our PCE forecasts call for steady-to-lower readings for February: 2.4% for the headline number and for 2.6% for the core reading, as lingering inflation in certain sticky-priced services remains a challenge. Overall, inflation in this cycle peaked in summer 2022 and has been on a fairly consistent downward trek since then. We track 20 inflation measures on a monthly basis. On average, they are indicating that prices are rising at a 3.15% rate year over year, essentially flat with a month ago. The numbers are volatile and are distorted by swings within the volatile Producer Price Inflation report. Focusing on core inflation - which we obtain by averaging Core CPI, market-based PCE Ex-Food & Energy, the five-year forward inflation expectation rate, the 10-year TIPs Break-even Interest Rate, and the core PCE Price Index - our reading is 2.60%, lower by five basis points month over month. Investors are expecting that the Fed's series of rate hikes ultimately will tame inflation, with the five-year forward expectation rate at 2.15%. Given inflation trends, we expect the Fed to remain on the sideline for the first half of 2025 and then implement two rate cuts in 2H24, with the ultimate goal of aligning the fed funds rate to approximately 100 basis points above the long-term inflation rate within the next 8-10 quarters.

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

The Vickers Top Insider Picks is a daily report that utilizes a proprietary algorithm to identify 25 companies with compelling insider purchase histories based on transactions over the past three months.