Are small and mid-cap companies weathering the US economic storm?

The US reported Q2 GDP of -32.9%. Whilst better than some expectations, it was still the worst figure since the Great Depression.

Fortunately, GDP is a backward looking metric.

What is most important for US small and mid-cap equities is the surge in activity in May and June, and that continuing as we enter the third quarter.

That momentum has led to a plethora of earnings surprises this season, admittedly off a low base.

But looking forward, as the US economy continues to inflect off the bottom, we expect to see a broadening of growth. That could lead to positive earnings surprises for US small and mid-cap companies, relative to their large cap peers.

As relative earnings growth improves, we expect to see a catch-up in performance of small and mid-cap companies versus their large cap peers, continuing a trend we have seen since the market bottomed in late March.


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The forecasts stated in the document are the result of statistical modelling, based on a number of assumptions. Forecasts are subject to a high level of uncertainty regarding future economic and market factors that may affect actual future performance. The forecasts are provided to you for information purposes as at today’s date. Our assumptions may change materially with changes in underlying assumptions that may occur, among other things, as economic and market conditions change. We assume no obligation to provide you with updates or changes to this data as assumptions, economic and market conditions, models or other matters change.