What's Next For Markets Is Change Afoot?
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Aug 31, 2025 Emily Nadell, Deputy Chief Investment Strategist at Piper Sandler, shares her insights on the sizzling performance of equity markets, especially the S&P 500 hitting new highs. She elaborates on the contrasting returns between large growth and small-cap stocks amid persistent higher interest rates. The conversation shifts to the anticipated Fed rate cuts and their potential to uplift small caps. Emily underscores the need to monitor key economic indicators like employment and inflation to sustain market momentum, hinting at a cautiously optimistic economic outlook.
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Equities Are In A Strong Multi-Year Run
- The S&P 500 recently hit all-time highs and is up double digits this year after strong multi-year gains.
- Since April 8th the S&P is up over 30%, marking one of the fastest recoveries from a trough in history.
Market Returns Are Highly Bifurcated
- Returns have been highly bifurcated: large growth soared while small caps and value lagged.
- Since January 2023 large growth is nearly +100% while small value remains under +20%.
Higher Rates Hit Small Caps Hardest
- Smaller companies suffer more from a higher-for-longer interest-rate environment.
- Small caps pay higher borrowing costs and carry more debt relative to size, magnifying rate impacts.