Small and mid cap stocks are looking much more attractive, says Northwestern's Matt Stucky

• Small and mid-cap stocks are poised for continued outperformance due to improving earnings revisions and attractive valuations.
• Anticipated Fed rate cuts, potentially spurred by softer inflation, are expected to fuel growth in more cyclical economic sectors.
• Diversification beyond concentrated mega-cap tech into small/mid caps and international stocks is recommended for risk management and to capture broader productivity gains from AI adoption.

Matt Stucky of Northwestern Mutual anticipates continued outperformance from small and mid-cap stocks, driven by improving earnings revisions and compressing valuation spreads. He believes softer inflation could prompt further Fed rate cuts, benefiting more cyclical parts of the economy and advocates for diversification beyond mega-cap tech into these segments and international equities.