Goldman Sachs' Bullish Outlook on Small Caps Amid Expected Fed Rate Cuts

On November 17, 2025, Greg Tuorto (portfolio manager at Goldman Sachs Asset Management) appeared on CNBC’s ‘Squawk on the Street’ to discuss his bullish stance on small cap stocks despite recent volatility [1]. Short-term market data shows the Russell 2000 Index (^RUT) and iShares Russell 2000 ETF (IWM) declined ~2.7% over the 10-day period ending Nov17 [0]. Tuorto’s view aligns with GSAM’s broader expectation that small caps will benefit from upcoming Federal Reserve rate cuts—Goldman Sachs forecasts a December rate cut [3], which would reduce small caps’ relative debt servicing costs and support growth [2]. Sector performance on Nov17 saw Healthcare (+0.95%) and Utilities (+0.93%) as top performers, while Financial Services (-1.49%) lagged [0].

1. Rate Cut Sensitivity
   : Small caps are more sensitive to interest rate changes than large caps—lower rates directly alleviate their higher debt burden, making Tuorto’s bullish outlook contingent on Fed policy execution [2][3].
2. Volatility vs. Opportunity
   : Recent declines (~2.7% in ^RUT/IWM) may present buying opportunities for investors aligned with GSAM’s medium-term view, though small caps inherently carry higher volatility [0][1].
3. Sector Disparities
   : While Financials underperformed on Nov17, rate-sensitive sectors like Real Estate and Industrials (small cap segments) could benefit from easing monetary policy [0][4].

• Medium-Term Outperformance
  : If the Fed cuts rates in December as forecast, small caps may outperform large caps as per GSAM’s analysis [2][3].
• Entry Points
  : Recent volatility offers potential entry points for long-term investors who share Tuorto’s bullish thesis [0][1].

• Policy Uncertainty
  : Any delay or reversal of Fed rate cuts would undermine the positive outlook for small caps [3][4].
• Volatility Risk
  : Small caps exhibit higher volatility—evidenced by the ~2.7% drop over 10 days—requiring investors to have appropriate risk tolerance [0].
• Economic Slowdown
  : A recession would disproportionately harm small caps due to weaker balance sheets and lower liquidity compared to large caps [2].

• Small Cap Performance
  : ^RUT (-2.68%) and IWM (-2.66%) over Nov7-Nov17 [0].
• Fed Forecast
  : Goldman Sachs expects a December rate cut [3].
• Affected Instruments
  : Directly: IWM; Indirectly: small cap stocks in rate-sensitive sectors [0][1].
• Information Gaps
  : Specific sectors/companies recommended by Tuorto were not detailed in the CNBC interview [1].

This analysis is for informational purposes only and does not constitute investment advice.