ESAB - TimesSquare Capital Global Small Cap Strategy Q2 2024 Commentary
2024-07-25 13:15:00 ET
Summary
- In Europe, the ECB faces challenges significantly lowering interest rates in 2024.
- The narrative for Technology and related services continues with its GenAI headlines.
- Among Industrials, strength persisted for longer-cycle end markets such as electrification, aerospace and defense, and infrastructure.
- The Global Small Cap Portfolio underperformed the MSCI World Small Cap benchmark during the second quarter of2024.
- During the recent earnings reporting season, aside from pockets of technology or industrial infrastructure spending, companies were especially cautious about the near term, though many projected rebounds later in 2024.
The second quarter was good for the equity markets-provided one only owned a handful of the largest, most growthy, U.S. stocks (i.e., the Magnificent Seven).
- While the S&P 500 climbed 4%, the equal-weighted version of the index declined by -3%. That lagged the flat 0% return for non-U.S. developed markets (MSCI EAFE) and a 5% gain from MSCI Emerging Markets.
- Momentum continued to be the dominant global market factor, though Profitability was positive this quarter after negative or neutral results in prior quarters.
- Distinctions between growth and value were overshadowed among large caps given the outperformance of the Magnificent Seven. Beyond that there was little differentiation by style among mid caps, small caps, or outside the U.S.
- Specific to the international small cap universe, Europe was the only positive region while Japan and the Middle East saw the large declines.