ALRS - Mairs & Power Small Cap Fund Q2 2024 Commentary

2024-08-01 12:20:00 ET

Summary

• Despite economic growth slowing in the second quarter, there are reasons to feel cautiously optimistic.
• During the first half of 2024, the Mairs & Power Small Cap Fund is up 2.20%, outperforming the S&P Small Cap 600 Total Return benchmark, which is down 0.72%, and slightly underperforming its peer group, the Morningstar U.S. Fund Small Blend, which is up 2.25%.
• Small cap stocks currently trade at a 40% discount to the broader market as measured by the S&P 500, a 13% discount to the S&P 500 Equal-Weighted Index, and at a 15% discount to small cap stocks’ long-term average as measured by the S&P Small Cap 600.

Market Overview

The Federal Reserve (Fed) continues to make progress in its effort to balance economic growth with inflation. However, the stock market has been anything but balanced, with a handful of stocks generating nearly all the market returns so far this year. Though the S&P 500 ended the quarter on another up note, the index's overall positive performance was again driven by a narrow group of stocks. So far in 2024, 64% of the market's return can be attributed to seven names (Alphabet, Amazon, Apple, Eli Lilly, Meta, Microsoft, and Nvidia). At the same time, 75% of S&P 500 stocks are underperforming the index, 38% have had negative returns, and only two sectors out of 11 outperformed the index (Technology and Communication Services)....

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