With the stock market on a roller coaster ride this year, investors have been scrambling to find assets that can offer returns. While large caps have had their moments in the sun throughout the year, it’s been smaller “cap” stocks that have been stealing the show recently.
Small caps, namely those that make up the S&P 600 index, have rocketed to the upside in the last month, leaving large caps in the dust. This is mainly due to the fact that investors are flocking to venture capital type stocks while technology and consumer staple companies dominate large cap indexes such as the Dow Jones and S&P 500.
Small cap stocks have traditionally been more risky due to their size and lack of liquidity compared to large cap stocks, but this hasn’t deterred investors one bit. Investors are capitalizing on the fact that small cap stocks can yield big returns if the right opportunity is picked.
Looking at the year-to-date, the S&P 600 index is the clear winner, posting a return of 16.93 percent while large caps in the S&P 500 have only gained 11.98 percent. This divergence is due to the fact that small caps are benefiting from rising optimism among retail investors as they continue to pour into flashy tech and biotechnology stocks which have a greater presence in the S&P 600.
Though large caps have performed well throughout the past decade, if the trend of the past month continues, small caps will continue to be the go-to asset when looking to make a profit. It remains to be seen if large caps will be able to catch up, or if small caps will continue to post gains and leave their larger peers in the dust.