In This Article:
Glenmede vice president of investment strategy Mike Reynolds joins Catalysts to discuss how investors can best position their portfolios amid the release of the most recent economic data.
"The thesis in this environment is rotation," Reynolds explains. He notes that after the last two Consumer Price Index (CPI) reports, small cap stocks (^RUT) opened higher: "That's a part of the equity stack that hasn't participated in this ongoing bull market, that has a bit of a catch-up trade."
For investors looking to leverage the latest economic readings, Reynolds states: "We're looking at fair valuations on small caps versus more expensive valuations in large caps. Valuations by themselves aren't a great timing mechanism, but it's perhaps more confidence that the Fed [Federal Reserve] is going to be able to cut [interest rates] this year. That's really getting people excited about small caps, particularly because small caps have a larger share of their debt in floating-rate loans, so they're going to be more directly sensitive to the Fed rate cut decision."
Related Videos
For more expert insight and the latest market action, click here to watch this full episode of Catalysts.
This post was written by Melanie Riehl