![]() He has investments in healthcare and technology. “It feels better to me than it has been for a while,” said John Ragard, senior portfolio manager of small cap equity at Spouting Rock Asset Management. Apellis Pharmaceuticals shares are up 69.1% for the year, Rambus added 64.9%, Shockwave Medical 44.1% and Saia added 48.8%. Investors have taken notice, driving some small caps to outperform the broader market. That means that small caps are cheap historically and in comparison to their large cap counterparts. The S&P 500, which contains large caps, in contrast, trades at multiples of 19, above its 10-year average of 17.61. The S&P 600 currently trades at about 13.53 times its expected earnings, below its 10-year average of 15.89, according to FactSet. Some investors say cheap valuations and hopes for a muted economic downturn means small caps look more attractive than they have in months. ![]() Now, the rally in small caps suggests that Wall Street is optimistic about the economy’s health. The recovery in small caps is a reversal from when they nosedived earlier this year, weighed down by the collapses of Silicon Valley Bank, Signature Bank and later First Republic Bank, which triggered a sell-off in financial stocks. That’s partly because they’ve helped broaden a narrow rally led largely by mega-cap tech stocks, which have soared to staggering heights due to an artificial intelligence race and flight to safety on Wall Street. ![]() Investors say that recent gains in small caps are helping prop up the burgeoning bull market, even as a potential economic downturn draws near. While those stocks have stabilized since the banking turmoil earlier this year, their continued steadiness is necessary for a sustained market rally, since healthy banks underline a healthy economy. They also have large exposure to financial stocks. Small cap stocks are domestic bellwethers, since smaller companies generate most of their revenue from US customers. The S&P 600 small-cap index has rebounded roughly 8% from its low in May, and is on pace to notch its first winning month since January. Beaten-down stocks of smaller companies are finally making a comeback, underscoring Wall Street’s newfound optimism.
0 Comments
Leave a Reply. |