From a purely earning growth perspective, 2022 strongly supports the global small cap market, Jim Shore, client portfolio manager at American Century Investments, said in a recent blog post penned for InvestorDaily.
According to Mr Shore, the global small cap market is expected to gain strength from economic recovery, cost reductions achieved during the market downturn, and significant potential for merger and acquisitions activity.
“Small cap stocks are projected to deliver faster earnings growth in 2022 – relative to their large cap peers – and the asset class continues to provide many attractive stock selection opportunities,” Mr Shore said.
“While consensus earnings-per-share growth numbers may come down and the market sees a challenging earnings environment early in 2022, there remains an attractive backdrop for small cap earnings growth in the second half of the year,” he explained.
Mr Shore believes that lingering volatility will continue to create stock-picking opportunities for small cap investors.
“Given the high level of uncertainty in the market, maintaining a diversified portfolio of companies that represent compelling process fits, businesses with accelerating and sustainable earnings growth, is critical.”
Other key considerations driving the performance of global small caps for the remainder of the year include robust information technology spending and easing supply chain bottlenecks.
“It has been a remarkable couple of years for global share markets, and uncertainty is likely to remain in the short to medium term, at least. But for global small cap investors, such volatility has the capacity to create opportunities that would otherwise not exist.”
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Maja Garaca Djurdjevic
Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.
