When new clients first come to our firm, we often find their portfolios packed with large-cap stocks, companies that are valued at more than $10 billion. These are the companies that comprise the S&P 500. Although large-cap stock is a good place to start, once you begin to build a portfolio, it is essential to include small-cap stocks with $300 million to $2 billion in market cap. These companies are much smaller, so they have more significant potential to deliver outsized returns than larger companies.
A banking crisis, the debt ceiling, recessionary fears, and increasing global tensions are reasons investors are fearful. Yet you may have noticed that the US stock market has been acting kind of strange lately. So, let’s talk about what is happening with the US stock market – specifically large-cap stocks – many people think of the S&P 500.
The past year was challenging with high interest rates and inflation, recession fears and a war which set the stage for nervous investors and downward markets. While all the major equity and fixed income asset classes were down, alternative “enhancer” asset classes had mixed results, supporting a well-diversified portfolio. In addition, a tilt towards quality and value further protected portfolios from experiencing the full decline of the markets.