Doug Basile, Portfolio Specialist with the Heritage Growth Equity team at Wells Fargo Asset Management, lends insight into what makes small-cap growth stock appealing now and over time.
October brought a significant drawdown across major U.S. equity indices. Fears over the potentially negative effects of tariffs and higher interest rates on global growth have been building for most of the year. We think the speed of interest rate increases (as opposed to their absolute levels) may have been the catalyst that spooked U.S. markets into correction territory, with technology bearing the brunt of the pullback. We are closely watching for additional risk-off signals. Credit spreads have widened, as is typically the case when volatility spikes. But, the fixed-income market isn’t showing signs of panic. The continued volatility in emerging markets bears watching. Against this mixed view of current market dynamics, we believe several factors support the case to sustain long-term U.S. growth equity allocations.
We believe small-cap equities are appealing in today’s economic environment. A number of developments have improved their appeal.