Adding A Bit Of Risk

Markets are rallying because the end of the rate hiking cycle is in sight. We believe that eventually concerns about slowing growth will displace worries about the Fed and inflation, but for now, we are getting on board with the rally. We are upgrading Small to overweight and downgrading Large to underweight from neutral. Small is to benefit from rate stabilization, a rally in Treasurys, and a reset in earnings growth expectations. This is a tactical allocation as we are still cautious about overweighing US equities on a strategic basis.