Small-caps historically decline before and after the first interest rate cut, Barclays reported.
This argues against the growing narrative that the easing cycle will boost small-caps, the bank said.
AdvertisementBarclays ResearchTheir finding opposes many prevailing viewpoints on Wall Street, where rising bets of lower interest rates have sent investors piling into the small-cap trade.
In part, falling interest rates might help ease debt burdens, but they can also signal a cooling economy — which favors large-cap exposure.
Market veteran Ed Yardeni wrote this week that the small-caps trade has no legs, given the sector's lackluster forward earnings, revenue, and profit margins.
Persons:
—, Venu Krishna, Russell, June's, Tom Lee, Ed Yardeni, Liz Young Thomas
Organizations:
Barclays, Service, NASDAQ, Federal