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Good Times for Small-Cap Stocks as the New Year Draws Near |
12/11/2024 |
Dyn-o-mite! Did your portfolio benefit from the impressive post-election small-cap stock run-up? And are there further gains in store?
November proved to be a favorable month for small-cap stock investors. The S&P SmallCap 600 index gained 8.4% in the month, resulting in a year-to-date increase of 19.5%. The S&P 600’s result still trail the S&P 500 index's 26.8% year-to-date rise.
As of the end of November, the S&P SmallCap 600 had outperformed the S&P 500 over the past 52 weeks, with gains of 33.7% compared to 32.02%. It has been quite some time since small-cap stocks led the market.
The likely driver behind this small company outperformance appears to be reactions to the Presidential election. On a basic level, a pro-growth, anti-tax administration may be seen as beneficial for American businesses, although there are valid concerns that trade tariffs could significantly raise prices on a wide range of consumer products.
Another perspective suggests that smaller companies tend to be more domestically focused, potentially insulating them from some of the adverse effects of a trade war. Nonetheless, it is difficult to envision a scenario where increased costs for imports from Mexico and China would not significantly affect smaller companies.
Additionally, the anticipation of possible interest rate reductions in 2024 or early 2025, or at least a halt in increases, might also explain the rise in small-cap stocks.
Regardless, it is encouraging to witness this small-cap rally after a prolonged wait. Whether this momentum will continue through the end of December, however, remains to be seen.
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Our focus stock in this issue is a return to a technology stock that measures up well at its current price.
Stay the course!
- DOUG GERLACH
Subscribers can read Doug's complete commentary and the in-depth profile of our recommended small company stock in the December 2024 issue of the SmallCap Informer stock newsletter. Not a subscriber? Subscribe to the SmallCap Informer and get monthly small company stock recommendations and updated buy/sell prices for each of the 45 high-quality small company stocks currently covered in the newsletter.