Rate cuts
What rate cuts mean for portfolios.
Wellow turned a belief about rate cuts in late 2026 into a structured thesis. Below: which assets historically reignite when the Fed eases, which to be careful about, and the macro data points that confirm or break the call.
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Frequently asked
- Which assets benefit most from Fed rate cuts?
- Long-duration assets (long-bond indices, growth equities, real estate) re-rate as discount rates fall. Small-caps tend to outperform large-caps in the early cycle as financing costs drop disproportionately for higher-leverage businesses. The full ranking is in the thesis below.
- Are rate cuts always good for stocks?
- No. Cuts that arrive *because* growth is collapsing tend to coincide with earnings drawdowns that overwhelm the multiple expansion. Cuts that arrive while growth holds (a soft landing) are unambiguously positive for risk assets. The thesis below covers the signals that distinguish the two.
- Small-caps and rate cuts — is the relationship reliable?
- Historically yes, especially in the first 6–12 months after the cycle pivots. Small-caps carry more floating-rate debt and higher financing sensitivity than large-caps, so easing flows through more directly to earnings. Watch credit spreads, not just rate levels.
- What macro indicators should I watch around the Fed pivot?
- Headline and core PCE, the unemployment rate (Sahm rule territory), the Fed funds futures curve, and the 10y minus 2y spread. These are the load-bearing data points in the thesis below.