2024-07-23 10:20:00 ET
Summary
- In the second quarter of 2024, equity markets were a mixed bag.
- Overall, large cap stocks continue to outperform small cap stocks, a trend that has persisted for the better part of the last decade.
- While the timing of the first rate cut is uncertain, the Fed is leaning toward a more accommodative position which could lead to a better environment for small cap stocks, while also leaving room for continued earnings growth for large cap companies.
- We also believe there is an opportunity building forsmall cap stocks due to attractive valuations and the underperformance vs large cap stocks over the years.
Q2 2024 NCG Performance Commentary
Market Review
In the second quarter of 2024, equity markets were a mixed bag. Large cap indices generally posted positive results while small cap indices were generally negative. April was negative across the board, May bounced back to be positive, and June was mixed. The debate right now revolves around the timing of the first rate cut and the number of cuts in 2024. Economic data continues to be solid and inflation, while much lower than 12-18 months ago, remains elevated. Employment trends remain healthy but have shown signs of softening. These issues remain key focus areas for the Fed and complicate their decision-making process and messaging to the markets. Our philosophy, process and team remain consistent, and we continue to invest in what we believe are the fastest growing and highest quality companies in America. Please see the performance table for details.
Market breadth remains a highly discussed topic. Overall, large cap stocks continue to outperform small cap stocks, a trend that has persisted for the better part of the last decade. Through 2Q 2024, the Russell 1000 Growth Index has delivered a 10-year annualized return of 16.32% vs the Russell 2000 Growth and Microcap Growth Indexes at 7.28% and 3.61%, respectively. In the first half of 2024, the Russell 1000 Index was up 14.2% and the Russell 2000 Index was up 1.7%. This is the 6th worst relative performance for small caps vs large caps on record during the first half of a calendar year. Part of the difference in performance relates to healthy business fundamentals of large cap companies, which we think can be sustained. But we also believe there is opportunity building for our smaller cap strategies. In prior instances of extreme small cap underperformance in the first half, small cap stocks have on average experienced both positive absolute and relative performance in the second half. In addition, small cap stocks are trading at 20-year relative low valuations levels vs large caps, and historically small caps have generally outperformed large caps following the first Fed rate cut and for a sustained period afterward....
Read the full article on Seeking Alpha
For further details see:
Next Century Growth Investors Q2 2024 Commentary