ClearBridge Small Cap Strategy Q2 2025 Commentary

2025-07-23 09:50:00 ET

By Albert Grosman & Brian Lund, CFA

Low-Quality Earners Lead Small Cap Rally - Market Overview

Small cap stocks experienced whipsaw performance in the second quarter, as April’s “Liberation Day” market decline was swiftly followed by a rally — with the Russell 2000 Index recovering to within 10% of its record November 2024 highs in merely 55 days, driven largely by growth, momentum, high-beta and low-quality stocks. Although small caps rose higher on the broader market rally, they failed to keep pace with larger cap peers due to their perceived greater sensitivity to macroeconomic shocks, like the highest tariffs imposed since the Smoot-Hawley Tariff Act of 1930....

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