Uncle Jerome dropped rates 0.25% yesterday, which was largely expected.
And just like I told you they would, small caps were off to the races today, up 2.3%.
Small businesses rely on financing WAY more than the Nvidia’s of the world. When the Fed drops rates… it also drops interest rates on small business loans… which reduces borrowing costs for those businesses… so they can hire more and market more and build more.
And don’t look now, but the black sheep of your portfolio family – emerging markets – has ripped 6.5% over the last 2 weeks and is the best performing asset class this year, up 27%.
Aren’t you glad we’ve been rebalancing out of large caps and into small caps and emerging markets?
This is why we diversify and rebalance.
All of the ingredients in your Financial Zen Portfolio Recipe have roughly the same risk/return profile.
However, each ingredient will be more “in season” at different points in the economic cycle and current fiscal/monetary policies.
Just like you can buy winter gear at a discount in the middle of summer, we’ve been buying small caps and emerging markets at a steep discount over the last few years.
And now it’ll pay off.