MSTR - Aristotle Capital Small Cap Equity Q1 2024 Commentary

2024-05-15 08:10:00 ET

Summary

• Aristotle Capital Management is an independent/employee-owned investment management organization that specializes in equity and fixed income portfolio management for institutional and advisory clients worldwide.
• Small caps added to their fourth quarter 2023 gains to begin the year with the Russell 2000 delivering a total return of 5.18%.
• For the first quarter of 2024, the Aristotle Small Cap Equity Composite posted a total return of 3.96% net of fees, trailing the 5.18% total return of the Russell 2000 Index.
• Underperformance was driven by security selection while allocation effects positively contributed.

Markets Review

Small caps added to their fourth quarter 2023 gains to begin the year with the Russell 2000 delivering a total return of 5.18%. Resilient economic data helped support investor sentiment during the first quarter. The U.S. economy was confirmed to have grown by more than expected during Q4 2023, while survey data from the composite Manufacturing Purchasing Managers' Index (PMI) reentered expansionary territory. Stickier inflation prints and healthy labor data, however, are among the factors that have altered expectations about the timing and magnitude of interest rate cuts over the past few months. Earlier this year, the federal funds futures market had priced in as many as six 25-basis-point cuts to the federal funds target rate for this calendar year. Now that number is down to three, with some market prognosticators suggesting that the Fed won't lower interest rates this year at all, due to the strength of the economy and the risk that inflation will remain too high....

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