Guest: Jay Hatfield, CEO of Infrastructure Capital Advisors
Host: Melanie Schaffer
Key Themes: Fed Policy • Rate Cuts • AI Boom • Small Caps • Income Strategies
The Fed’s Pivot — Right Decision, Wrong Reason
In his latest Lead-Lag Live appearance, Jay Hatfield argues that the Federal Reserve’s dovish shift is both overdue and ironically justified for the wrong reasons.
“We’re lucky they’re doing the right thing,” he said, “but it’s for the wrong reasons — a weak labor market rather than better forecasting.”
Hatfield criticizes the Fed’s structural flaws — including its arbitrary inflation target, lagging data, and failure to track money supply and housing. Despite those issues, he believes rate cuts are now inevitable as the central bank recognizes labor market softness. That, he says, could be bullish for risk assets heading into 2026.
From Inflation Fears to AI Euphoria
Hatfield recently raised his S&P 500 target from 6,600 to 7,000, and even sees 7,700 by late 2026, grounded in stronger AI-driven earnings growth and a lower-rate environment. He warns against chasing hype, emphasizing data over opinions:
“Everyone gets too excited about billionaires’ opinions. The facts are that next year’s earnings can justify a higher multiple if rates fall and AI growth accelerates.”
The key risk? A Fed pause that reignites housing weakness and pushes long-term yields higher.
Playing Small Caps and Income with Discipline
While some investors are diving into speculative small caps, Hatfield prefers a “GARP” (Growth at a Reasonable Price) approach — favoring dividend-paying small caps that trade at reasonable multiples. He highlights S-CAP, InfraCap’s small-cap dividend fund, which leans on conservative positioning, income generation, and selective covered-call writing.
For income investors, he points to preferreds and bonds as undervalued amid market panic:
“The fear around auto finance contagion is overdone. Funds like PFFA and BNDS are miles away from that risk — it’s a buying opportunity.”
Boom Risk, Not Recession Risk
Despite global slowdown fears, Hatfield sees zero probability of recession — provided the Fed follows through on rate cuts. If policy stays accommodative, he warns the real risk could be a boom:
“We may be entering a Goldilocks market — lower rates, strong earnings, and AI momentum. Even a trade war won’t derail that.”
DISCLAIMER – PLEASE READ: This is a sponsored episode for which Lead-Lag Publishing, LLC has been paid a fee. Lead-Lag Publishing, LLC does not guarantee the accuracy or completeness of the information provided in the episode or make any representation as to its quality. All statements and expressions provided in this episode are the sole opinion of Infrastructure Capital and Lead-Lag Publishing, LLC expressly disclaims any responsibility for action taken in connection with the information provided in the discussion. The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax, or other advice. The views expressed by the participants are solely their own. A participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in any jurisdiction. Please consult your own investment or financial advisor for advice related to all investment decisions.
