Time to pay attention to small caps

Can the bull market rally of the past few weeks be sustained in the short term?

The recent rally in the equity market has been of such a magnitude that it seems difficult to anticipate a significant extension of the rally in the coming days or weeks. However, many factors lead us to believe that the stock trend should continue to be bullish in the coming months . The ” momentum”” The economy is improving, expectations for economic growth for 2023 are rising, and sentiment indicators are picking up. Inflation has also started to fall significantly and is expected to intensify 12 months after the invasion of Ukraine, as the contribution of energy, food and freight will become deflationary. All of this should allow central banks to stop raising rates soon and put liquidity back into the system. From a fundamental standpoint, the valuation of the European market remains attractive compared to the historical average (13.3x 12-month P/E vs. 14.1x on average since 2000). Finally, from a technical point of view, the trend has been upward since October,

What are the characteristics of small and mid-cap companies in Europe?

What defines mid&small caps in relation to large caps is their cyclical nature , which is reflected in a high beta (statistical sensitivity to equity indices) of 1.21x and a breakdown by style that exceeds- represents the “ value ” and “ growth ” sectors to the detriment of the “ visibility / quality” styles”. This goes a long way to explaining the small- and mid-cap segment’s debacle in 2022 as economic momentum collapsed. The rising dollar also weighed on the market last year, at least relative to large caps, as small and mid caps are more domestic in nature. Read the full article in Rankia Pro

News translated by Google translator.