Lead-Lag Live After the Rate Cuts: Jay Hatfield on Why Income, Small Caps, and Credit Could Lead Into 2026
Dec 24, 2025
Jay Hatfield, CEO of Infrastructure Capital Advisors and expert in macro research, dives into the implications of the Fed’s rate cuts on markets. He predicts a bullish S&P 500 trajectory, potentially reaching 7,000–8,000. Hatfield emphasizes the advantages of preferred stocks and high-yield credit in a dovish cycle. He discusses how small-cap value could outperform as investors shift away from mega-cap tech. Strategies focusing on dividends can also reduce portfolio volatility, providing attractive alternatives for income investors.
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Fed Cuts Drive The Economic Cycle
- The Fed controls cycles by changing the monetary base, which moves rates and housing activity.
- Jay Hatfield expects inflation to fall toward 2% and rates to normalize around Fed funds ~2.75% next year.
Shift Into Preferreds And High Yield
- Move into preferreds and high yield credit as cuts arrive because they should see both yield and price gains.
- Investors will rotate from cash/money markets into higher-yielding credit once Fed rates settle lower.
Prefer Proven Preferred Funds
- Expect preferreds to deliver coupon now and price appreciation when Fed cuts are clear.
- Favor funds with track records and be ready for stronger inflows as investors seek yield above low money-market rates.