Updates with new blog entry
US indexes fall; Nasdaq off ~1%
Comm Svcs leads S&P 500 sector gains; Tech weakest group
Dollar gains; crude, gold slip, bitcoin down 1.5%
US 10-Year Treasury yield edges down to ~4.13%
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SMALL CAPS CAN BE A HEDGE AGAINST AI MANIA
Small cap stocks are a possible hedge against the optimism over artificial intelligence that has underpinned recent market performance, Talley Leger, chief market strategist at The Wealth Consulting Group, told Reuters in an interview.
Unlike in recent times, small cap stocks are trading at a large discount compared to their larger cap counterparts, putting them in position for significant gains in the near term, Leger says.
The S&P 600 small cap index .SPCY is down 0.4% this year compared with the S&P 500 .SPX, which is up 13.5% in the same period.
"The space has been underperforming for a good 14 years so the valuations are exceptionally attractive," Leger says. "But that's not enough," he adds.
The earnings of small cap companies are expected to grow faster next year as interest rates are in a downward trend while strong growth in large cap earnings is also expected to normalize, Leger says.
The "risk premium" in small caps is also healthy while market volatility and investor fear have declined.
"The smaller cohort of the equity market isn't known for its stability and consistency of earnings but the low base effects are very powerful coming off a bottom," Leger says. "So it can produce extremely rapid growth rates."
(Chibuike Oguh)
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AI MANIA POWERS WALL STREET AS JPMORGAN WARNS OF FRAGILE FOUNDATIONS CLICK HERE
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MAPPING MARKETS: WHAT COMES NEXT AFTER THE SELLOFF? CLICK HERE
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S&P 500 INDEX AND THE RESILIENCE OF ITS 50-DMA CLICK HERE
U.S. CORPORATE SENTIMENT KEEPS GETTING BETTER CLICK HERE
EUROPE'S EARNINGS POISED FOR A REBOUND – JPM CLICK HERE
BUDGET FLIP-FLOPPING IS MAKING UK MARKETS LESS ATTRACTIVE CLICK HERE
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EUROPE BEFORE THE BELL: CAUTIOUS START, US DATA LOOMS LARGE CLICK HERE
NVIDIA EARNINGS LIKELY TO OVERSHADOW DELAYED US DATA CLICK HERE
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