Results for search of category: Small Caps

Two Big Ideas for 2021

In 2021, we expect our models to recommend an extended underweight in US Equities and an overweight in Small Caps, particularly Europe, The US underweight is controversial and has often been wrong, but investors need to know that we have been significantly overweight for most of the last 10 years. The underweight worked well in the recoveries of 2003-04 and 2009, and we participated on both occasions. The same is true of our overweight on Small Caps, which is our preferred way of playing the economic recovery and equity rotation at the same time.  [Read More... ]

The Meaning of Boris

The result of the UK election has made the country more attractive to international equity investors, but not to domestic investors, except in the sense that equities everywhere have become more attractive relative to fixed income. We do have substantial overweight positions in cyclical sectors like Industrials, but these are funded by underweights in other cyclical sectors like Materials. We expect to upgrade Small Caps to overweight in the near future, but we have already done so in Japan and the Eurozone. It’s all a bit underwhelming. But our models are clear that if you think that the UK will prosper outside the EU, you should buy Ireland.  [Read More... ]

Three Unrelated Ideas

Nothing has happened to move the dial on any of our major themes; so this a time for housekeeping and some small ideas. The three we have chosen are: reducing exposure to the Energy sector, using Spanish government bonds as the safe-haven against election shocks in Europe, and increasing exposure to UK and Eurozone Small Caps.  [Read More... ]

Rolling the Dice Again

Our US equity model has suddenly started dumping defensives and buying cyclicals and Financials. It looks as though US investors are rolling the dice again. Their only hope of outperforming in a dull year is to generate some alpha in their US equity portfolio, but it’s a low conviction trade.  [Read More... ]

Mind the Gap

When Eurozone investors are a lot more bullish about global equities than their US counterparts, we start to get nervous. There are structural reasons for this behaviour, but it can be a sign that a correction in equity markets is on the way.  [Read More... ]

Of Coalmines and Canaries

Small Caps are often a good indicator of investors’ attitude to equity risk. This week we launch a new set of sector models including Small Caps for all the main equity regions. The message is not encouraging. Small Caps are ranked last or second last in every region apart from Japan, where they were ranked in the bottom two until last week. This is like a chorus of canaries tweeting that there is gas in the mine.  [Read More... ]

Value Not Growth in Small Caps

It is a common misconception, but US Small Caps are more closely correlated to the value style, not the growth style. They also tend to underperform when monetary policy is being tightened. GDP growth does not lead to Small Cap outperformance.  [Read More... ]

Scenario Analysis

Not much has happened to move the dial on the great risk on / risk off debate, so we take some time out to explain how we do our scenario analysis, or rather what we do instead of it. Our two most important scenarios are (1) if US equities go down, small caps will continue to suffer and (2) if they don’t, Emerging Market equities are likely to do well.  [Read More... ]


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