One thing that repeated Tuesday is the continued underperformance of small cap stocks. Year to date the S&P is up +1.6% while the Russell 2000 trails far behind at -3.7%.
So Reity, should we overweight safer large caps?
By nature I am a contrarian. So the recent outperformance of large caps does not tempt me to overweight in that direction. As they say:
“Past performance is not a guarantee of future results” .
As it pertains to the current investment landscape, this year is about squeezing excess premium from stocks with bloated PEs. So whenever valuation is in question, then you want to own stocks with high enough earnings growth to justify their PE.
Simply, that is not going to be found in year 5 of a bull rally in the large cap space as most are too big to have great earnings growth. Better to search for lesser known small and mid cap names that have excellent growth prospects along with more reasonable valuations.
Best,
Steve Reitmeister ( aka Reity…pronounced “Righty” )
Executive Vice President
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