RBC Capital analysts are urging caution with U.S. small-cap stocks, saying it’s best to “stay on the sidelines for now.” In a note, the investment bank highlighted a less promising near-term outlook for small caps, citing several factors.
RBC: Decoupling Is Underway, Neutral For Now
The continued outperformance of mega-cap growth stocks has been logical but somewhat jarring to RBC, especially as Treasury yields have declined, historically benefiting small caps. However, RBC suggests a decoupling is underway, as reported by the website Investing.
Factors contributing to the outsized performance of large-cap growth stocks (making it more attractive) include:
- Slowing GDP forecasts,
- More positive recent earnings revisions
- Reduced crowding in the large-cap growth sector
Despite acknowledging ...