This ETF Has a Lot Riding on the Fed’s Next Move
Small-cap stocks have performed well in 2026, but that could potentially change.
Overview
Small-cap stocks had their best first half in 35 years in 2026, and a big reason is that interest rate policy has cooperated. We'll get into the details in a bit, but the series of rate cuts we saw in 2025 gave small caps a valuable tailwind, and the general assumption throughout the first half was that the Fed's next move would be another rate cut.
Fast-forward to the present, and that's no longer the case. In fact, the market is pricing in a 57% chance of a rate hike when the Fed meets in a couple of weeks, according to the CME FedWatch tool. And the base case is now for the federal funds rate to be at least 50 basis points higher in a year than it is now.
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Details
Source
Originally published at www.fool.com.