Erika Maschmeyer, Columbia Threadneedle Investments portfolio manager joins Catalysts to discuss the state of small-cap stocks and why investors are more optimistic about them. Maschmeyer lays out five reasons why investors are more bullish on small-cap stocks. First, she notes that the US economy is strong, which provides a great backdrop for these stocks to outperform. Second, small- and mid-cap stocks have been at attractive valuations relative to where they have historically traded. Her third point is that the Federal Reserve has kicked off its rate-cutting cycle, and these stocks are in a position to benefit from lower interest rates. Meanwhile, mega-cap stocks have outperformed because their earnings have outperformed, and her fourth point is that there may not be any catalysts left to further push those stocks. Finally, she points to "market FOMO," or the fear of missing out: "I think the second you have small and mid-cap stocks start to do better, there’s FOMO. People don’t want to be left behind and I think that helps drive them even further, especially when you’ve got this backdrop of a risk-on market." Watch the video above to hear some of Maschmeyer’s strategies for playing small- and mid-cap stocks.
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