Equities should do very well after Fed rate cut if no recession occurs, says Wells Fargo's Cronk

Market Outlook - Strategists are adjusting their year-end S&P targets, with one raising it to between 6,600 and 6,800, while also anticipating increased volatility [1] - The market has responded positively to the Fed's decision to lower interest rates, coinciding with a stable economy [2] Economic Conditions - The fiscal landscape is improving, with significant legislation passed, which could lead to a better economic environment in 2026 if monetary policy continues on its current path [3] - Corporate balance sheets are reported to be in a strong position, with high yield spreads at fresh lows [4] Banking Sector - Historically, when the Fed cuts interest rates, banks typically face challenges such as lower credit quality or increased defaults; however, this is not the case currently, as banks are at all-time highs [5] Market Performance - Equal-weighted tech stocks have reached new all-time highs, indicating positive market sentiment for the remainder of the year and into the next [6] - Small-cap stocks are not viewed as the preferred investment vehicle, despite their near-term outperformance due to the current Fed cutting cycle [7] Small-Cap Stocks - The Russell 2000 index, with a market cap of $3 trillion, is significantly smaller compared to the overall $67 trillion US stock market, and the tech sector's $28 trillion market cap [8] - The idea of rotating from tech to small caps is considered nonsensical, as there has been a degradation in quality within the small-cap universe due to private capital acquisition of strong companies [9] - There is a notable presence of non-earners in the small-cap sector, leading to a recommendation to underweight small caps [10]