Expertise

Following the Federal Reserve's half-point cut in interest rates, we expect the healthy yields recently enjoyed from "risk-free" assets¹ may begin to decline. We think this creates an opportune time to take a deeper look at the advantages of dividend-paying stocks.

The COVID-19 pandemic has fundamentally changed the way Americans work. The proliferation of remote and hybrid work schedules has significantly decreased the demand for office space in major cities, with office vacancy rates reaching 20.1% nationwide in Q2 2024, exceeding 20%¹ for the first time. The trend away from fully in-person work schedules has already begun to impact the owners and developers of these buildings. Figure 1 illustrates how the delinquency rate on maturing office loans has spiked to 68.5% as of July 31, 2024, from 0.1% in 2020, while the pace of refinancings has dropped exponentially.

The Magnificent 7's (Mag 7) market dominance and chart-topping performance have captured headlines in recent years. Small caps, by contrast, have lagged in performance and market attention. Nonetheless, there is a strong case to be made for investing in quality small caps today.