Thursday, January 10, 2019

Small Caps: The Next Big Thing?

The asset class to watch this year may turn out to be small caps. Analysts are expecting firms in the Russell 2000 index of small-capitalization companies collectively to post double-digit profit gains throughout 2019, according to financial-data provider Refinitiv, far outpacing the S&P 500.

Refinitive projects that profits across the Russell 2000 will grow by nearly 16 percent in the first quarter from a year earlier, building on the 12.6 percent earnings growth rate those companies were expected to hit in the final three months of 2018. By contrast, the S&P 500 is projected to expand earnings by around 6 percent in each of the first two quarters of the year.

That would be a turnaround from the way we closed 2018. The Russell 2000 fell 12 percent last December, its worst month ever. The index slid more than 20 percent from its August 31 record high to post its worst annual performance since the 2008 crisis.

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