Harding Loevner Global Small Companies Equity Q4 2024 Report

2025-02-18 10:30:00 ET

Summary

• Global stock markets ended 2024 on a down note, with US stocks outperforming due to AI enthusiasm and growth-oriented index heavyweights.
• The Global Small Companies Equity composite underperformed, mainly due to weak stocks in Industrials and IT sectors, and poor US holdings.
• Quality-growth small companies faced challenges, but the valuation premium has narrowed, creating better future return opportunities.
• High-quality, growing companies like Carl Zeiss Meditec and Shift are trading at attractive prices, presenting strong investment opportunities.

What Happened

Global stock markets finished the final quarter of 2024 on a down note, while US stocks significantly outpaced the rest of the world, in both the quarter and the year, boosted by strong returns from growth-oriented index heavyweights and continued enthusiasm for artificial intelligence. The MSCI ACWI Small Cap Index was down 3.2% for the quarter, although it gained 8.2% for the year.

Donald Trump’s victory in the US presidential election gave US equities an extra bump, as investors looked forward to some business-friendly policies, such as tax cuts and deregulation, while perhaps overlooking the consequences to US companies of some potentially less business-friendly ones. International equity markets took a more cautious view of the incoming administration, as did US bond investors, who sent bond prices lower presumably anticipating further fiscal largesse. The ICE US Treasury Core Bond Index, which maintains exposure to Treasuries ranging from one- to thirty-year maturities, fell 4% after peaking in mid-September....

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