Investing Ideas

What to make of the move by small caps

Despite potential opportunity costs, the relative strength for small caps could be durable.

By: Denise Chisholm Bryan Sajjadi Seth Marks Burr Clark Scott Allard Vino Ravichandran
Updated: 8/21/2024
Key Takeaways
  • Our equity specialists recently have seen one of the largest weekly inflows of institutional money into small cap stocks in nearly a decade.
  • The relative strength for small caps could continue: Since 2010, the combination of large investor inflows and falling rates has helped small caps outperform large caps over the next 12 months.
  • One of the issues with small caps is that nearly half the stocks in the small cap Russell 2000 index do not generate earnings.
  • Investing in actively managed funds and ETFs could help investors avoid some of the small cap stocks with the least attractive earnings trends.
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