Stubbornly strong inflation has eroded prospects of rate cuts this year, and small cap stocks have suffered as a result.
NEW YORK: The prospect of interest rates remaining elevated as the Federal Reserve battles inflation is further clouding the outlook for shares of smaller US companies, which have lagged broader markets this year.
Small cap stocks surged at the end of 2023, as expectations grew that the Fed was done raising interest rates and would soon begin easing monetary policy. That would be a welcome change for smaller companies, which rely more heavily on debt financing and consumer spending.
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