Are small and mid-cap companies weathering the US economic storm?
After the US reported its worst quarterly GDP figure since the Great Depression, Bob Kaynor discusses the outlook for US small and mid-cap companies.
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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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