Fed's rate cut could catapult mid-cap stocks over the S&P 500 as the top trade, strategists say

Published On Sep 29, 2024, 12:23 PM

As the Federal Reserve begins cutting interest rates for the first time since 2020, strategists believe that mid-cap stocks may outperform both small and large-cap stocks. Historical trends suggest that mid-caps tend to see significant gains following rate cuts. Analysts from Carson Group predict a potential rise of up to 20% for small and mid-cap stocks over the next 12 months, driven by improved investor sentiment and the appeal of relatively low valuations in this sector. Goldman Sachs supports this view, noting lower valuations and consistent economic growth as catalysts for mid-cap stock performance. However, caution remains regarding the pace of rate cuts and economic data, which could impact small-cap stocks more adversely than mid-caps. Overall, mid-cap stocks are considered a stronger hedge in the upcoming market environment.