S&P 500 Fwd. Earnings Growth and Russell 2000 Fwd. Earnings Growth The recovery in EPS growth has been driven by a small number of large-cap companies, which may indicate a late-cycle extension in the economic cycle. Image: Morgan Stanley Research
Russell 2000 Net Futures Contracts The current net long positioning of asset managers and leveraged funds in Russell 2000 futures indicates a strong belief in the potential for growth in U.S. small-cap stocks. Image: Deutsche Bank Asset Allocation
Valuation – Relative Forward P/E: Russell 2000 vs. Russell 1000 Small-caps may be an attractive option for long-term investors looking to diversify their investment portfolios, as they offer relatively cheaper valuations compared to large-caps. Image: BofA US Equity & Quant Strategy
Performance – Ratio of Russell 2000 Index to Nasdaq Composite Small-cap stocks are currently at a record low relative to the Nasdaq Composite. Factors that could drive small-cap stocks to outperform include a rise in M&A and IPOs, robust earnings growth, and changes in interest rates. Image: BofA Global Investment Strategy
Performance of Different U.S. Fama French Factor Returns U.S. small-cap value has been the best bet over the past 25 years. However, small-cap value stocks are typically more volatile in the short term, making a long-term investment strategy necessary. Image: BofA Research Investment Committee
Net Buys by Size Segment Bofa’s clients maintain their preference for large-caps, while showing less interest in small-caps and mid-caps. Image: BofA Securities
Valuation – Russell 2000 Forward P/E The April sell-off has brought the U.S. small-cap forward P/E ratio back below the historical average, suggesting a potential undervaluation of small-cap stocks and creating buying opportunities for long-term investors. Image: BofA US Equity & Quant Strategy
Russell 2000 Forward P/E vs. Subsequent 10-Year Annualized Returns Should long-term investors increase their allocation to U.S. small-cap stocks, given the potential for 9% annualized ten-year returns suggested by the absolute forward P/E for the Russell 2000? Image: BofA US Equity & Quant Strategy
Russell 2000 Technology Sector Relative to Total Index U.S. small-cap technology stocks have exhibited a noteworthy level of outperformance within the universe of U.S. small-cap stocks, which can be attributed to higher growth potential and the ability to innovate and disrupt traditional industries. Image: Morgan Stanley Wealth Management
Modeled Forward Russell 2000 Returns Conditional on Coincident Real U.S. GDP Growth The performance of small-cap stocks is linked to economic conditions. Weak U.S. economic growth may affect their returns, while strong growth offers potential for solid returns. Image: Goldman Sachs Global Investment Research
Russell 2000 Returns After Last Rate Hike Should equity investors favor U.S. small-cap stocks following the last Fed rate hike? Image: BofA Global Investment Strategy