PCE came in 0.1% lower than forecast driving down the dollar and treasury yields which had surged following the FOMC mtg on 12/18. W/ many oversold conditions & positive seasonality typical to end the yr, I believe we saw the lows for December for the S&P this morning.

I like small & mid-cap stocks as the best risk adjust way to participate versus the mega-cap tech stocks through year-end and into 2025. Earnings should grow for those combined sectors on average for the first time since 2022 in 2025 given the US first, pro-growth policies of the incoming administration. These same policies are likely to act as headwinds for the more export exposed large cap names in the S&P500 by comparison.

The performance of the mid & small cap sectors have also lagged dramatically since the AI driven tech surge over the past two years. The S&P500 is +53%, S&P Midcap +28% and S&P Smallcap +22% from 12/31/22 through 12/19/24. As a result, valuations are more compelling as well at 19x PE for mid and 20x for small versus 25x for the S&P. The valuation of the mid & small sectors should also benefit from any AI digestion phase in 2025 driving investment dollars back into these less loved sectors of the market.