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Matt's Market Insights

 

I mentioned in Monday's remarks that small-cap stocks are one area of the market that concerns me. These smaller, less developed companies trade more on growth potential than actual growth. As a result, they outperform in a strong business cycle and underperform as an economy slows.

 

During 2013, a year of tremendous growth during which you could pick winners by throwing darts, small-cap stocks beat the pants off the broader market. The S&P rose 30% during 2013, but the Russell 2000 was up an incredible 37%. But this year the tides have changed. As you can see in the chart below, the S&P 500 is up over 8% for the year, while the Russell 2000 is up less than 1%.

 

It's evident from recent earnings reports that we're still in a growth environment, but the rate of growth may be slowing. This is causing investors to shift funds away from more speculative areas ... Log in or subscribe to continue reading.


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