The Federal Reserve’s path of higher rates for longer could delay the recovery of small cap stocks and international shares. A strategist says that this doesn’t mean investors shouldn’t invest in these assets. This year, small cap stocks and international stocks have been lagging behind. S & P Small Cap 600 has fallen 1% this year, while the S & P 500 is still up by over 12% on the previous year. The iShares Core MSCI International Developed Markets (IDEV), meanwhile, has gained more than 5% in the same period. Sam Stovall, CFRA’s chief investment strategist, believes that the Fed’s uncertainty about future monetary policies — on Wednesday, the Fed projected another rate hike for this year and less in 2024 — will likely lead to a further decline in equity prices. Stovall said that this uncertainty could also mean that mid- and smaller-cap stocks that are trading at attractive PE discounts relative to their current prices will take longer to return to the top. The strategist still believes that these assets are worthy of investor attention. They are not only trading at attractive prices, but they may be set for a rapid recovery when the Fed starts cutting rates. CALF YTD mountain GCOW has risen by over 8% in the past year while CALF has risen by 15%. These exchange traded fund identify stocks that generate stable cash flows and are relatively low-risk, making them reliable investments in difficult times. Stovall explained that if we saw a turnaround of small and international companies, these funds would benefit. However, they could also perform better if the recovery was delayed. He said, “In a way, you are holding the bluest blue-chip stocks globally, or the strongest small cap stocks.” “