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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