Could Small Cap Stocks Be a Sweet Spot in 2024?

Favorable backdrop and valuations for small cap stocks are explored by Vaughan Nelson’s CEO Chris Wallis.

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.
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This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Natixis Investment Managers, or any of its affiliates. The views and opinions are as of 11/28/2023 and may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary.

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