The Zhitong Finance App learned that recently, Wall Street has begun to have doubts about the strength and speed of the Federal Reserve's interest rate cuts. However, Goldman Sachs told investors that 2025 will still be a “harvest year” for interest-sensitive assets, including small-cap stocks and bonds.

The Federal Reserve began cutting short-term interest rates in September, and most investors expect this easing policy to continue until 2025. However, the market is divided over the magnitude and pace of interest rate cuts. Influenced by October Consumer Price Index (CPI) data and Federal Reserve Chairman Powell's cautious statement, the market believes that the possibility that the Fed will skip interest rate cuts at the December 17-18 meeting surged from 20% at the beginning of last week to more than 40%.

The slowing pace of interest rate cuts is likely to put pressure on bonds, as bond prices are trending opposite to interest rates. However, Goldman Sachs Asset Management did not share this view in its 2025 outlook published on Tuesday.

Goldman Sachs said, “Although the US election results have widened the scope of uncertainty in economic trends, we still expect the Federal Reserve to continue to cut interest rates in December and early 2025.”

The company believes that the choice of portfolio allocation in bonds in 2025 may bring significant returns, particularly finding opportunities in areas such as corporate bonds and securitized credit.

For stock market investors, cutting interest rates is just as significant. In recent years, the US stock market has been mainly driven by large-cap growth stocks, especially large technology companies in the field of artificial intelligence. However, Goldman Sachs warns that these giants' current market dominance may be difficult to sustain, and reminds investors to be wary of passives such as the S&P 500Index funds.

By contrast, small-cap stocks may deserve more attention in 2025. Goldman Sachs pointed out that small-cap stocks are more sensitive to changes in interest rates because these companies usually have weak financial conditions and higher financing costs, so they can benefit more from falling interest rates.

Despite the fact that since this year, small-cap stocksRussell 2000 IndexThe increase (about 15%) lags far behind the S&P 500 index (about 25%), but small-cap valuations are more attractive. Currently, the price-earnings ratio of small-cap stocks is about 15 times, while large-cap stocks are over 21 times.

Goldman Sachs said, “We expect small-cap stocks to reverse their fortunes in 2025, thanks to valuation discounts for small-cap stocks compared to large-cap stocks, and a supportive interest rate cut environment.”

Trump's victory in the presidential election is also a potential positive factor for small-cap stocks. Although interest rates rose after winning the election, Goldman Sachs believes that its tariff plan may be more unfavorable to large multinational companies.

Goldman Sachs pointed out, “Compared to large enterprises, the revenue sources of small enterprises are more concentrated domestically, and the supply chain is shorter, so they are more resistant to the negative effects of tariffs.”