Could Small Cap Stocks Be a Sweet Spot in 2024?

Opportunities in small cap stocks are as good as Chris Wallis, CEO, CIO, Senior Portfolio Manager, at Vaughan Nelson Investment Management, has seen. This upbeat outlook for 2024 is predicated on valuations, especially compared to the large cap universe, and positive economic fundamentals in the US.
Here are highlights from Wallis’ small cap video commentary:

Multiple areas of opportunity: There are interesting names across every sector – even in the financial sector, now that higher interest rates appear to be in the rear-view mirror.

Macro factors in a US presidential election year: Weaker economic data in the first half of the year should shift to accelerated activity in the second half – a lot of which has to do with the funding cycle of the federal government. A buildup in the US Treasury General Account, which tends to be typical in election years, should lead to pushing liquidity out into the economy later in the year.

Advantages of active management in today’s landscape: Whereas the overall small cap index may struggle in 2024, active management should have plenty of opportunities to exploit the disparity in outcomes between companies with healthy balance sheets and those with impaired ones.