Wednesday , December 12 2018

JPMorgan: Dumping small stocks at recessions a mistake

Bloomberg

Avoiding smaller stocks around recessions may be a big error. While US small-cap and midcap equities have historically underperformed large caps during recession-linked down- turns, the gap pales in comparison with smaller stocks’ superior returns over a full economic cycle, according to a note from JPMorgan Chase & Co. strategists led by Eduardo Lecubarri. They say an economic contraction isn’t imminent, but are encouraging investors to limit risk in case one comes sooner than expected. During the past five recessions, the Russell 2000’s average loss from peak to trough is 39.2 percent, compared with 34 percent for the S&P 500, according to JPMorgan’s calculations.

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