Insight
Global Small-Cap Stocks: Three Signs of a Resurgence
The Special Global Equity team identifies three current market conditions, including U.S. large cap concentration, high but falling inflation, and attractive small-cap stock valuations, and explores why they may signal a comeback for global small-cap stocks.
Key takeaways
- Despite recent strong performance by large-cap stocks, there are current market conditions that we believe signal a rotation to global small caps.
- On average, global small-cap stocks have outperformed U.S. and global large-cap stocks following periods of high U.S. large-cap stock concentration and high but falling inflation―conditions we are experiencing today.
- Small-cap stock valuations in many regions indicate attractive entry points, with U.S. and European small caps trading below their historical median P/E ratios.
- Appreciating the implications of these market conditions can uncover a timely opportunity to allocate to global small-cap stocks.