Wasatch Small Cap Value Fund Q2 2025 Commentary

2025-08-08 06:25:00 ET

Overview

The U.S. equity market finished with positive total returns in the second quarter, albeit with a high level of volatility. In early April, President Donald Trump unveiled a tariff plan with a far more protectionist bent than market participants had been expecting. Stocks plunged in response as investors began to factor in an environment of slower economic growth and higher inflation. This news was particularly damaging for small caps, since companies in the category tend to have above-average economic sensitivity. The picture changed significantly within a week after President Trump announced a 90-day pause on new tariffs. Investors appeared to conclude that the initial announcement was largely a negotiating ploy. The pause restored confidence and helped the market stage a quick recovery. As the quarter progressed and data related to economic growth, inflation and corporate earnings exhibited stability, stocks marched steadily higher. While major large-cap indexes achieved new highs, small cap value stocks lagged somewhat due to underperformance early in the period....

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