| And the Magnificent Seven - a group of seven megacap technology growth stocks associated with artificial intelligence - have led the way. Because the S&P 500 is a weighted index, companies with the largest market caps have a bigger impact on it. And all of the Magnificent Seven stocks are among the 11 largest firms in the world. But the Magnificent Seven's recent run - as a group, they're up 230% since the October 2022 beginning of the current bull market - has also made them very expensive. The forward price-to-earnings ratio (P/E) of the Magnificent Seven now stands at 28.6. That's far higher than the S&P 500's P/E (22.2) and nearly double that of the S&P SmallCap 600 Index (just 15.6). And now, several challenges that have held small cap companies back are receding. So there are suddenly new opportunities in the small cap space. Rate Cuts Coming Small companies have suffered from higher borrowing costs since the Federal Reserve started hiking rates in early 2022 in response to spiking inflation. These companies tend to have less in the way of profits, so they rely more heavily on credit to fund their operations. And credit has been expensive the last few years. But relief is likely on the way. It looks increasingly likely that the Fed will begin reducing rates later this year. Futures traders are now pricing in at least two quarter-point rate cuts by the end of the year, and possibly three. And historically, small caps have benefited the most during interest rate easing cycles. Since 1954, small cap stocks gained on average 14.2% after the first Fed cut, while large caps gained 9.4%. And a year after the first cut, small caps gained nearly 27% while large caps rose about 16%. An 11-percentage-point outperformance is pretty significant for any asset class. | 
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