MoneyLife with Chuck Jaffe
Baird's Mayfield: The Fed Is Done Cutting; Market's Not Done Rising
Why It Matters
Understanding whether the Fed will pause or reverse rate cuts is crucial for setting realistic portfolio expectations in a volatile environment. Meanwhile, the rapid rise of a niche ETF like DRAM highlights both the opportunities and risks of chasing thematic, high‑concentration bets in fast‑growing tech segments.
Key Takeaways
- •Fed likely finished cutting rates, may raise them later
- •Market climbs on AI and chip stocks despite negative headlines
- •Small‑cap rally shows breadth, but remains vulnerable to rate hikes
- •Roundhill Memory ETF gathered $6B, three major chip makers
Pulse Analysis
In the latest Money Life interview, Baird strategist Ross Mayfield argued the Federal Reserve is essentially done lowering interest rates and could even consider hikes if inflation pressures re‑emerge. With core inflation hovering around 2‑2.5%, the Fed’s policy pivot removes the traditional rate‑cut catalyst that many investment theses relied on. Mayfield highlighted the market’s surprising resilience, noting that equities continue to flirt with record highs despite a barrage of negative headlines, from producer‑price spikes to geopolitical tensions.
The rally is being powered primarily by artificial‑intelligence infrastructure and semiconductor names, creating a narrower but fiercely robust market segment. While large‑cap AI stocks dominate, Mayfield observed a healthier breadth as small‑cap indexes, especially the Russell 2000, have outperformed larger benchmarks this year. International exposure also adds depth, with Asian markets and emerging economies benefitting from commodity strength. Nonetheless, the small‑cap surge remains sensitive to higher‑for‑longer rate environments, underscoring the need for diversified positioning.
Amid this backdrop, the Roundhill Memory ETF (DRAM) has captured over $6 billion in assets within a month, concentrating roughly 70% of its holdings in Micron Technology, SK Hynix, and Samsung Electronics. The fund’s rapid ascent reflects investor appetite for thematic plays tied to AI‑driven memory demand, yet its tight concentration amplifies volatility risk. Mayfield cautioned listeners to weigh the fund’s exposure against broader semiconductor alternatives like VanEck’s SMH, and to consider the potential “theme jinx” that can follow fast‑gaining ETFs. Understanding the underlying stocks and diversification benefits remains essential for investors navigating this high‑growth, high‑risk segment.
Episode Description
Ross Mayfield, investment strategist at Baird, says that the Federal Reserve "is going to be very hard pressed to find a reason to cut [rates] here," and he thinks that if the central bank does have to make rate reductions down the road, "it won't be for reasons investors would be excited about." Mayfield says he remains bullish, noting that "a consolidation period is probably in order," setting up a volatile summer setting up a continuation of the bull market later in the year, barring any sort of exogenous shock. And speaking of shocks, Mayfield addresses what he sees as building signs of a market bubble, and while he says they bear watching, he is not expecting that kind of action to result from current conditions.
Todd Rosenbluth, head of research at VettaFi, makes Roundhill Memory — a brand-new fund that has raked in billions of dollars in assets in just weeks since it opened — his "ETF of the Week," noting that the fund has gotten off to a gangbusters start but that the fund's focus on just a few hot stocks should have investors concerned about whether it's a flash in the pan or here to last.
Will Rhind, chief executive officer at GraniteShares, returns to the Market Call, and focuses largely on business-development companies, which got hammered due to software lending in March, rebounded sharply in April but remain unloved by the market today. GraniteShares' HIPS U.S. High Income ETF invests largely in BDCs and closed-end funds; Rhind outlines the current yield outlook in that space and for master limited partnerships.
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