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Don't Forget About Me! Small-Caps Have Trailed Their Big Brothers, But That May Soon Change

Apr 30, 2019

Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions
Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions

 

  • There is no doubt that US Large-Cap stocks have gotten all the love recently, with both the S&P 500 and Nasdaq setting records on Monday and the Dow Jones within a whisper of a record
  • "Large Caps Rule!" seems to be the cry
  • Small-caps, by contrast, have been the brussel sprouts of the market, left on the plate while large-caps have been gobbled up; the Russell 2000 is more than 8% off its record level
  • Since the sell-off late in 2018, large-caps have rocketed while small-caps have more like hopped
  • There are a number of recent macro developments that could favor small-caps, they may finally see some more love
  • First, a dovish Fed with no rate hikes in sight is very positive for small caps; they are especially sensitive to a rise in interest rates and a stable rate environment with the potential for cuts at some point very favorable for small-caps
  • Second, the benign inflation environment is supportive in that it makes any need for rate hikes less likely
  • Third, recent US dollar strength make imports less attractive, which helps small-caps exposed to international competition much more than large-caps
  • Most analysts agree, if small-cap stocks break out to the upside, the rest of the market will follow and a nice leg-up will ensue
  • Our Goldilocks economy right now - string growth, full employment, no rate hikes coming and tepid inflation - makes that a good bet

 

  • All our US Large-Cap Global Top Stock Idea, click here
  • All our US SMID-Cap Global Top Stock Idea, click here

 

Global Top Stock IdeasTOP LONG & TOP SHORT STOCK IDEAS FOR GLOBAL MARKETSMONTHLY TOP IDEAS FROM OUR MULTI-FACTOR QUANTITATIVE MODELS
Global Top Stock IdeasTOP LONG & TOP SHORT STOCK IDEAS FOR GLOBAL MARKETSMONTHLY TOP IDEAS FROM OUR MULTI-FACTOR QUANTITATIVE MODELS