Do you think that small-cap stocks have peaked?
That’s the question that everyone has been asking. However, no one has a perfect answer because no one can say for sure where the market is headed next. In thinking about the current dynamic pace of returns, I also thought about a few things that are key to how we see the small-cap world here at Royce: We believe in reversion to the mean; the cyclical nature of markets is very real to us. We don’t pretend to know how to time market cycles, but we never get too excited during bullish phases like the current period, and we don’t get too upset during corrections. Markets are always changing, and we work hard to be prepared for those changes. Related to this is the idea of rotation. I can’t say for sure what part of the equity world will lead next—we’re obviously hoping it’s high quality—but it’s clear that there will be a shift. So while small-caps, as measured by the Russell 2000 Index, may have hit, or may be near, a peak, we see plenty of opportunity out there. Continue Reading »