article 05-18-2017

Asset TV Market Update: Why Fundamentals Matter Again in Small-Cap Stocks

Co-CIO Francis Gannon discusses key themes within the small-cap space, and tells financial journalist Liz Claman how fiscal policy and a reviving global economy could impact smaller companies.  

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"Simply put many of the trends that are in place in the small-cap market today started prior to the election.”

"To frame it within the Trump 100 Days, to me the most important date from our perspective in the small-cap asset class is the bottom of the market on February 11th 2016," said Co-Chief Investment Officer Francis Gannon on Asset TV’s Market Update: Trump's First 100 Days.

On May 2, 2017, Francis joined financial journalist and television host Liz Claman for the Asset TV Market Update, and discussed major transitions in the small-cap space.

"You've seen this non-earner bubble which was important in the Russell 2000's run up, has burst, and you're actually seeing the importance of earning, fundamentals matter again, which I think is really important in the small cap space."

He discussed potential benefits for smaller companies from proposed policy changes, saying, “Anything that can happen from a tax cut perspective from a corporate standpoint will be quite positive for the small-cap space."

Francis also discussed where he sees opportunities in the small-cap space today, saying, "Our thought process has been that the more economically sensitive or cyclical areas in the market are where the opportunity is. We have overpriced safety in the small-cap space for a number of years now. And industrial businesses, technology businesses are really where the opportunity is, because they are benefitting not only from trends here in the United States, like possible infrastructure spending and GDP growth, but also from a synchronized global economic recovery outside the United States."

Important Disclosure Information

The thoughts and opinions expressed in the video are solely those of the persons speaking as of May 2, 2017 and may differ from those of other Royce investment professionals, or the firm as a whole. There can be no assurance with regard to future market movements. 

The Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group. The Russell 2000 Index is an unmanaged, capitalization-weighted index of domestic small-cap stocks. It measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 Index. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index.

This material is not authorized for distribution unless preceded or accompanied by a current prospectus. Please read the prospectus carefully before investing or sending money. Smaller-cap stocks may involve considerably more risk than larger-cap stocks. (Please see "Primary Risks for Fund Investors" in the prospectus.)

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