Co-CIO Francis Gannon discusses key themes within the small-cap space, and tells financial journalist Liz Claman how fiscal policy and a reviving global economy could impact smaller companies.

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Small-cap
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“Simply put many of the trends that are in place in the small-cap market today started prior to the election.”

“To frame it within the Trump 100 Days, to me the most important date from our perspective in the small-cap asset class is the bottom of the market on February 11th 2016,” said Co-Chief Investment Officer Francis Gannon on Asset TV’s Market Update: Trump’s First 100 Days.

On May 2, 2017, Francis joined financial journalist and television host Liz Claman for the Asset TV Market Update, and discussed major transitions in the small-cap space.

“You’ve seen this non-earner bubble which was important in the Russell 2000’s run up, has burst, and you’re actually seeing the importance of earning, fundamentals matter again, which I think is really important in the small cap space.”

He discussed potential benefits for smaller companies from proposed policy changes, saying, “Anything that can happen from a tax cut perspective from a corporate standpoint will be quite positive for the small-cap space.”

Francis also discussed where he sees opportunities in the small-cap space today, saying, “Our thought process has been that the more economically sensitive or cyclical areas in the market are where the opportunity is. We have overpriced safety in the small-cap space for a number of years now. And industrial businesses, technology businesses are really where the opportunity is, because they are benefitting not only from trends here in the United States, like possible infrastructure spending and GDP growth, but also from a synchronized global economic recovery outside the United States.”

Article by The Royce Funds