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Should You Consider Small Cap Stocks in the Current Environment?

Small-cap stocks tend to outperform their larger peers over time. For example, global small-cap stocks posted 10-year annualized gains of 8.5% versus 5.5% for large caps between May 1994 and June 2021. At the same time, they outperformed in 187 of 206 ten-year periods, suggesting these gains aren’t simply attributable to one spectacular year.

That said, the Russell 2000 Index has been trading lower than the S&P 500 since January amid the broad market sell-off. With a recession on the horizon, many investors are understandably hesitant to invest in small-cap companies that may not have as much cash in the bank to weather a higher interest rate environment and slower consumer demand.

Let’s examine whether small-cap stocks represent a good opportunity in today’s market and where to find opportunities.

Be sure to check our Portfolio Management Channel to learn more about different portfolio rebalancing strategies.

What’s Coming Up?

Small-cap stocks fall further than large-cap stocks in a down market

Betting on a Rebound

100- of the Time, Positive 5-Year Returns Have Followed 5-Year Low Return Markets

Small-Cap ETFs to Consider

The Bottom Line