Small-company stocks are often the canaries in the market’s coal mine. Typically defined as stocks with a market value of less than $10 billion, their prices usually peak and then decline before large-company stock prices do in anticipation of a top in the economic cycle or a rise in interest rates. Similarly, “they tend to outperform early, when it seems like the worst is behind us,” says Sam Stovall, chief investment strategist at CFRA Research.
Lately, the canaries have been quite chirpy. Over the past six months, the Russell 2000, an index of small-cap stocks, gained a robust 9.1%. It led the S&P 500 index for part of that stretch, a good sign, given that the Russell has lagged the big-company benchmark in seven of the past 10 calendar years. (Returns and data are through March 31, unless otherwise noted.)
No one knows, of course, whether that trend will continue. Uncertainty reigns about when the Federal Reserve will pause its cycle of interest rate hikes and what kind of recession, if any, the economy may experience. But you have plenty of other reasons to give small-company stocks a look now.
For starters, they’re cheaper than they’ve been in decades. Compared with the S&P 500, the S&P SmallCap 600 index currently trades at a 36% discount, in terms of price-earnings multiples based on estimated earnings for the year ahead. That P/E is also a 22% discount to small caps’ average P/E since 2005. Large caps, by contrast, trade at a 16% premium to their average P/E since 2005.
هذه القصة مأخوذة من طبعة June 2023 من Kiplinger's Personal Finance.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
بالفعل مشترك ? تسجيل الدخول
هذه القصة مأخوذة من طبعة June 2023 من Kiplinger's Personal Finance.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
بالفعل مشترك? تسجيل الدخول
MAKING A DIFFERENCE IN THE LIVES OF DISABLED VETERANS
He suffered grave injuries in the line of duty. Now he helps other veterans who have disabilities.
DO YOU NEED UMBRELLA INSURANCE?
A policy can protect you from financially devastating events.
Navigating Finances as a Blended Family
Money matters can get complicated when two families unite. Planning is key.
BREAKING UP WITH YOUR BROKER
Be aware of these challenges when you move your money to a new home.
CHOOSE A MEDICARE PLAN THAT'S RIGHT FOR YOU
Consider your health care needs over the long term as you weigh costs and coverage.
Keep Faith in These Stocks
IN 1997, I coined the phrase “faith-based investing.” It has nothing to do with religion or with picking stocks at random.
OUR ESG PICKS ARE THRIVING
Despite an ongoing backlash, our favorite stocks and funds focused on environmental, social and corporate governance issues had a good year overall.
MONEY MANNERS FOR THE MODERN AGE
The customs for splitting a restaurant check, purchasing a wedding gift, tipping and more have evolved. These guidelines can help.
ELECTION 2024: POLITICS AND YOUR PORTFOLIO
Who wins the White House matters—but only at the margins when it comes to your investments.
YOUR GUIDE TO OPEN ENROLLMENT
With health care costs on the rise, it’s critical to select a plan that fits your needs at the right price.