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Equities

A time and place for small cap equities

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After handily outperforming both large caps and the broader U.S. equity market for the one-year period following the COVID recession in the spring of 2020, small cap stocks have since lagged, despite posting healthy double-digit gains in two of the past three calendar years. This performance gap reflects in part the narrow but persistent market leadership of a few high-flying mega cap technology companies supported by artificial intelligence (AI) tailwinds.

In the current environment, the odds of a recession are lower as the economy has proven resilient, productivity has improved and easier Fed policy now appears to be closer on the horizon — a plus for cyclical areas of the market like small caps. Based on analyst estimates, earnings are expected to grow faster for smaller than for larger companies.

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Endnotes

Index Performance: FactSet; European Corporate Earnings: I/B/E/S; U.S. Corporate Earnings: Standard & Poor’s; Employment: RBC Global Asset Management; Russell Indexes: FactSet, Russell Investments.

The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market, economic or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This report contains no investment recommendations and should not be construed as specific tax, legal, financial planning or investment advice. This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy or sell securities, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor's objectives and circumstances and in consultation with their advisors. 

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. For term definitions and index descriptions, please access the glossary on nuveen.com. Please note, it is not possible to invest directly in an index. Performance data shown represents past performance and does not predict or guarantee future results.

Important information on risk

Past performance is no guarantee of future results. There are risks inherent in any investment including, but not limited to, interest rate risk, credit risk, market risk and the possible loss of principal, and there is no assurance that an investment will provide positive performance over any period of time. Certain products and services may not be available to all entities or persons. There is no guarantee that the Fund's investment objectives will be achieved. See the applicable product literature for details. 

Economic and market forecasts are subject to uncertainty and may change based on varying market conditions, political and economic developments. This report should not be regarded by the recipients as a substitute for the exercise of their own judgment. It is important to review your investment objectives, risk tolerance and liquidity needs before choosing an investment style or manager. 

Equity investments are subject to market risk or the risk that stocks will decline in response to such factors as adverse company news or industry developments or a general economic decline. 

Non U.S. investments involve risks such as currency fluctuation, political and economic instability, lack of liquidity and differing legal and  accounting standards. These risks are magnified in emerging markets. 

Debt or fixed income securities are subject to market risk, credit risk, interest rate/duration risk, call risk, tax risk, political and economic risk, and income risk. As interest rates rise, bond prices fall. Credit risk refers to an issuers ability to make interest and principal payments when due. 

This information does not constitute investment research as defined under MiFID.

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