- Smaller companies popped in October, and investors are growing more optimistic about the stocks.
- Jeremy Grantham’s firm GMO just launched a fund targeting “quality” small-cap stocks.
- Its managers explain how they’re finding companies that are positioned to be long term winners.
Growing fears about a recession weren’t enough to stop small cap stocks from having a great month in October.
Markets bounced back in a big way last month, with smaller companies leading the way. The small-cap S&P 600 rallied 9% in October, while the S&P 500 benchmark rose a respectable 5%.
Conventional investing wisdom holds that smaller companies are more vulnerable to an economic downturn, and that their balance sheets and business track records aren’t as strong as those of their larger peers. But small caps seem to have some momentum behind them despite rising interest rates and signs of a slowing economy.