Historically, small cap stocks are often more sensitive to economic cycles and interest rate changes than their large cap counterparts. Why are rate cuts good for small cap stocks. Small cap stocks historically have outperformed large caps by 2 to 3% annually, but recently they've lagged behind in the current economic environment due to high interest rates and economic uncertainty.The Federal Reserve's high rate environment since 2022 has weighed heavily on small caps, which typically rely on borrowing to f ...

I was surprised to learn that some of the most profitable small caps are housed in the risk-on and cyclical Consumer Discretionary sector. Within the Pacer US Small Cap Cash Cows 100 ETF (BATS: CALF ), that sector commands theFreelance Financial Writer | Investments | Markets | Personal Finance | RetirementI create written content used in various formats including articles, blogs, emails, and social media for financial advisors and investment firms in a cost-efficient way. My passion is putting a narrative ...

Investment Strategy - TS Lombard is positioning for the Jackson Hole meeting by adjusting views on US small-cap and large-cap stocks [1] - The report suggests adjustments to views on the Japanese Yen (JPY), Swiss Franc (CHF), and Australian Dollar (AUD) assets [1]

All right, so I want to start off. What do you make of what we're seeing in the futures. Futures lower across the board as we await for uh JPAL over at Jackson Hole.What's your take on just the market sentiment right now. I >> I think you hit the nail on the head that that we've had a powerful 34% rally in the S&P over the last 4 and 1/2 months on the basis of the fact that first quarter, second quarter revenues and earnings much stronger than expected and an expectation that the Fed's going to start cuttin ...

All right, Jonathan Kinsky of BTI joins us now because that was the focus of your note which dropped during halftime today. Uh, and it got us thinking about whether this is finally the moment. Now, I probably have asked you and others that question 50 times within the last year.Is this the moment. But is this really it. Scott, you know, it's deja vu all over again.Um, if you go back 13 months ago, July of 2024, uh, small caps were hanging around flat year to date while the NASDAQ was ripping. We got a bette ...

Group 1: Tariff Impact and Market Reaction - The initial announcement of President Trump's tariffs led to a significant drop in major US indices, with the Nasdaq Composite falling over 10% in two weeks, but the actual implementation was less severe than expected, maintaining a base tariff rate of at least 10% [1] - Despite fears of rampant inflation due to tariffs, recent data indicates inflation has not escalated as anticipated, contributing to a rally on Wall Street with nearly 80% of stocks rising [2] Group 2: Small Cap Performance - The iShares Russell 2000 Index ETF (IWM) surged approximately 3% with a 25% increase in trading volume following a positive inflation report, indicating strong investor interest [3] - Interest rate cuts are particularly beneficial for small cap companies, as they rely more on debt and will experience reduced interest expenses, which supports their growth [4] - Small caps have been underperforming due to high interest rates, but with Nasdaq valuations rising, a rotation towards reasonably valued Russell stocks is expected [5] Group 3: Market Dynamics and Breakout Potential - The recent breakout of IWM is notable as it is above key moving averages, supported by a favorable rate environment and a 24% increase in volume, signaling strong demand [6] - Lower interest rates also positively impact crypto assets, with crypto ETFs showing strong performance even before any rate cuts are announced [8] Group 4: Overall Market Outlook - The current market environment, marked by easing inflation fears and a potential shift towards lower interest rates by the Federal Reserve, creates a favorable backdrop for small-cap stocks [9]

Core Insights - The article discusses the investment potential in certain stocks, particularly in the biotech and healthcare sectors, emphasizing the importance of due diligence for investors [2][3]. Group 1: Investment Opportunities - The stocks mentioned may already be part of various model portfolios, indicating their potential value and relevance in current market conditions [2]. - Small-cap and biotech stocks are highlighted as having higher risk but also the potential for significant returns, suggesting a strategic focus for investors looking for growth [2]. Group 2: Market Trends - The article notes that opinions on stocks can change over time with new data, indicating the dynamic nature of the market and the need for ongoing analysis [2]. - Companies mentioned may not be favored in the future as market trends evolve, which underscores the importance of staying informed about market shifts [2].

Market Overview & Strategy - Investors are seemingly overlooking tariffs, focusing on earnings and the Federal Reserve, though potential risks remain [1][2] - The economy shows signs of weakening, with less than 50% of industries hiring in the past 3 months and consumer spending growth slowing [5][6] - The S&P 500's valuation at 245 times trailing 12-month earnings and 23 times forward 12-month earnings, with an expected 7% growth, appears optimistic [8] - Investors should broaden horizons, considering small-cap stocks, which are at their second-lowest valuation relative to large-cap stocks in 31 years [9] - International stocks are up around 20% year-to-date and are expected to continue performing well, potentially boosted by a weaker dollar [10] Small Cap & Interest Rates - Small-cap stocks present opportunities, especially with deregulation and lower tax rates potentially stimulating growth [9][13] - While historically lower rates reset the cycle for small caps, companies are adapting to current rates [12][13] - Investors with a time horizon beyond the next three minutes should consider small-cap stocks for the next 3-7 years, anticipating a cycle of different market leadership [15] Earnings Season & Forward Guidance - Forward guidance is crucial for investors to assess the impact of tariffs on individual companies [16] - Investors should pay attention to what they are paying for earnings revisions, as some large-cap stocks outside of technology trade at 40-60 times forward earnings [17] - A return to basics is advised, focusing on a margin of safety, valuation, and macroeconomic headwinds that may favor international and small/mid-cap stocks [18] Market Pullback & Investor Behavior - Historically, after reaching market peaks, the market continues to rise over 12-18 months, averaging 26%, but with drawdowns of 7% and 12-15% [20][21] - Long-term investors are advised to stay the course, while active investors should add optionality to their portfolios, considering low valuation stocks or hedging strategies using options [23][24] - A market dip is expected to be bought by retail investors, consistent with post-2020 behavior [27][28] AI & Tariff Impact - Structural AI leaders continue to be attractive, with adoption occurring across industries for both cost-cutting and revenue enhancement [33] - The market's shrug in response to recent tariff letters may be premature, given the potential for deals to be struck before August 1st [36][37]

Core Viewpoint - Small-cap stocks are currently undervalued, presenting potential investment opportunities, especially those offering high dividend yields ranging from 8.3% to 17.1% [2] Group 1: Small-Cap Stocks Overview - The valuation gap between the S&P 500 and S&P 600 is at its widest since the late 1990s, suggesting small-cap stocks are significantly cheaper [2] - The article discusses five small-cap stocks with attractive dividend yields, indicating a potential for high returns despite their current low valuations [2] Group 2: Playtika Holding (PLTK) - Playtika, a mobile game developer, has a dividend yield exceeding 8% but has not raised its payout recently, indicating a decline in earnings and sales [4][5] - Analysts project a 32% increase in profits for 2024, despite the company's struggles in the competitive mobile gaming market [6] - Playtika's valuation is low at 6 times forward earnings, but there are concerns about its growth prospects [7] Group 3: Carlyle Secured Lending (CGBD) - CGBD is a business development company focused on U.S. middle-market companies, primarily investing in first-lien debt [8][9] - Recent earnings reports have shown disappointing results, with an increase in non-accrual loans and a stagnant base dividend of 40 cents per share [10][11] - CGBD shares are trading at a 16% discount to net asset value, but operational challenges raise concerns about future dividend sustainability [12] Group 4: Bain Capital Specialty Finance (BCSF) - BCSF provides financing solutions to a diverse range of companies, with a significant portion of its investments in first-lien debt [13][14] - The company has maintained its regular dividend but has introduced special dividends, raising concerns about future dividend coverage due to declining net investment income projections [16][17] - Analysts expect BCSF's dividend ratios to be high, leaving little room for error in case of operational difficulties [17] Group 5: Two Harbors Investment Corp. (TWO) - TWO operates in the mortgage REIT sector, focusing on mortgage servicing rights and agency residential mortgage-backed securities [19][22] - The company has faced significant share price declines, resulting in a high yield of over 17%, but recent litigation charges could impact its book value and dividend sustainability [24][25] - TWO's current dividend rate of 45 cents per share is at risk due to the potential impact of litigation on earnings available for distribution [25] Group 6: Franklin BSP Realty Trust (FBRT) - FBRT is a mortgage REIT focused on commercial mortgage-backed securities, with a significant portion of its portfolio in multifamily properties [26][27] - The company is trading at a 28% discount to book value, with a low P/E ratio based on 2026 earnings estimates, indicating potential value [28] - Concerns exist regarding the stability of its dividend, as the payout has not changed since 2021, and market conditions could necessitate a review of the dividend policy [29][30]

Core Insights - The article discusses the investment potential in certain stocks, particularly in the biotech and healthcare sectors, emphasizing the importance of due diligence for investors [2][3]. Group 1 - The stocks mentioned may already be part of various model portfolios, indicating a strategic selection process for investment opportunities [2]. - Small-cap and biotech stocks are highlighted as carrying a higher risk of losses compared to the broader market, suggesting a need for careful evaluation [2]. - The article notes that opinions on stocks can change over time with new data, which may affect their future favorability in the market [2]. Group 2 - The article does not provide specific recommendations or advice on investment suitability, reinforcing the need for individual assessment by investors [3]. - It clarifies that past performance of stocks is not indicative of future results, which is a critical consideration for potential investors [3].