We believe higher-quality small caps look poised to outperform their large-cap peers over the near- to mid-term.

U.S. small cap equities are at an important juncture: Not only has the valuation gap between small and large-cap stocks grown exceptionally wide by historical measures, but also numerous small-cap macro tailwinds appear to be gathering force.

In our new report, we discuss why small caps appear poised to outperform their large-cap peers over the near- to mid-term. Given the relative size of the two cap categories, we believe a 1% reallocation from large to small caps could boost small cap returns by 20%. 

And while we acknowledge that shifts in sentiment can come with bouts of volatility and underperformance, we believe small cap investors are better off being early than late.

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