Aggressively Neutral

Small vs. Large

The discussion on small caps versus large caps highlights the valuation and performance differences between these stock categories. Lori Calvasina notes that small caps appear cheap relative to large caps, but they are not necessarily offering massive bargains at the moment 1. She explains that small caps have cleaned up their balance sheets, reducing their exposure to floating rates, which historically impacted their performance 1. Josh Brown adds that while small caps may not pre-trade well, they tend to perform better after easing starts, as seen in past market cycles 1.

You don't see it pre traded. It tends to happen after easing.

--- Lori Calvasina

The conversation also touches on the strategic allocation of small caps in portfolios, with Lori suggesting that writing off the asset class doesn't make sense for long-term investors 2.

   

Investment Insights

Investment strategies surrounding small caps are explored, with Lori Calvasina emphasizing the potential for macro tailwinds due to economic shifts like de-globalization and reindustrialization 2. She believes these trends could favor small cap industrials and consumer companies, reversing past global-focused themes 2. Josh Brown questions the relevance of small caps in long-term portfolios, given the dominance of large caps and the shrinking opportunity set in small caps 3.

There is still a lot of exciting stuff down there. And when I talk to small cap portfolio managers, they really take the idea of finding hidden gems, uncovering opportunities.

--- Lori Calvasina

Despite challenges, Lori argues that small caps still hold potential, especially in a post-COVID economy with potential interest rate relief 2.