US funds sector review – interest rate cuts on the way?

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Recent comments from the Federal Reserve governor hint at rate cuts. What could this, the valuation gap between small and large caps and the 2024 presidential race mean for the fund sector?

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Published on 12 December 2023

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

Federal Reserve (Fed) Governor Chistopher Waller recently set out a potential path for interest rates being cut sooner than expected.

There’s always been concerns that if the Fed raises rates too high or leaves them higher for too long, it could impact the country’s economic growth. The US market is expected to grow just 1.5% in 2024, well below emerging economies.

Except for some recent wobbles, the US economy has been extremely resilient for the most part. In particular, consumers are still spending their savings. This had fuelled talk that interest rates would stay higher for longer. An idea that investors were only just getting to grips with.

Now with interest rates potentially being cut because of lowering inflation (i.e. not because of recession) and headline