Small-cap companies remain fundamentally healthy

Sales and profits remain healthy among small-cap companies, lending investors an optimistic outlook for small-cap stocks in the new year. Francis X. Morris believes that conditions for small-cap stocks could actually improve if rates rise in the U.S.

×

Francis X. Morris
Chief Investment Officer — Core Equity

Small-cap companies remain fundamentally healthy

The outlook for corporate profitability in 2015, what we’re seeing right now are some very good signs fundamentally in terms of what affects small-cap sales and profits. First of all, we’re seeing stronger GDP. The most recent print was very strong and most economists have 2015 at roughly 3% GDP growth. That usually translates into higher sales and higher earnings and we think that will continue to play out as we move throughout 2015. So, that’s an important part of what will drive small-caps, that ability to meet or exceed expectations. Right now it’s very important, given where valuations are, that companies meet and exceed expectations.

Small-cap stocks could benefit from rising interest rates

We’ve had a constructive view with respect to rising rates and our constructive stance comes from the viewpoint, we feel that when and if rates go up, it will be for the right reasons, and that’s because there is better economic activity here in the U.S. And U.S. small-caps will directly benefit from that as over 80% of their operations are generated primarily domestically here in the U.S.


Video Insights

2:48

Info

Negative interest rates: Staying power for the ...

Jun-10-2016
2:15

Info

1Q 2016 wrap-up: Municipal bonds

Apr-19-2016
3:00

Info

Looking ahead at Fed policy: The perils of a st...

Mar-02-2016
2:11

Info

The aftermath of unorthodox monetary policy

Mar-02-2016
1:54

Info

Constructive conditions for healthcare stocks

Jan-28-2016
1:50

Info

A positive outlook for credit conditions

Jun-09-2015
2:43

Info

China's real estate market

May-25-2015
1:18

Info

Earnings point to continued modest growth

May-15-2015