5 Best Small-Cap Stocks to Benefit From Interest Rate Cuts

Economic Policy and Interest Rates - Federal Reserve Chairman Jerome Powell indicated the first reduction in the benchmark interest rate since March 2020, with the current Fed fund rate at 5.25-5.5%, the highest in 23 years [1][3] - Powell emphasized that the timing and extent of rate cuts will depend on incoming data and the evolving economic outlook [3][4] - The Fed's previous aggressive rate hikes were necessary to combat rising inflation, which peaked at a 40-year high in June 2022 [3][5] Impact on Small-Cap Stocks - Small-cap stocks are expected to benefit the most from a potential rate cut, as they rely heavily on affordable credit for survival [7] - The pandemic severely impacted small businesses due to demand issues and supply chain disruptions, leading to a challenging operating environment [5][6] - The current high-interest rate regime has further strained small businesses, which typically operate on thin profit margins and struggle to pass on increased costs to consumers [6] Recommended Small-Cap Stocks - Five small-cap stocks with strong momentum and favorable Zacks Rank are identified: Fulcrum Therapeutics Inc. (FULC), Heritage Insurance Holdings Inc. (HRTG), Latham Group Inc. (SWIM), Seanergy Maritime Holdings Corp. (SHIP), and BrainsWay Ltd. (BWAY) [2][8] - Each of these stocks has shown positive earnings estimate revisions in the past 30 days and currently holds a Zacks Rank 1 (Strong Buy) [8] Company-Specific Insights - Fulcrum Therapeutics Inc. (FULC): Focuses on developing treatments for genetically defined diseases, with an expected revenue growth rate of over 100% and earnings growth of 69.8% for the current year [10][12] - Heritage Insurance Holdings Inc. (HRTG): Provides various insurance products, with expected revenue and earnings growth rates of 11.2% and 10.3%, respectively [13][14] - Latham Group Inc. (SWIM): Designs and manufactures residential swimming pools, with expected revenue growth of 5.1% and earnings growth exceeding 100% [15][16] - Seanergy Maritime Holdings Corp. (SHIP): A Capesize ship owner with expected revenue growth of 48.1% and earnings growth over 100% [17][18] - BrainsWay Ltd. (BWAY): Develops neurostimulation treatments for mental health disorders, with expected revenue growth of 24.2% and earnings growth over 100% [19][21]