As renewed momentum brings small‑cap stocks back into focus, investor attention has increasingly gravitated toward speculative, headline‑driven names tied to AI and emerging technologies. In a recent byline, Ben Falcone, Managing Director, explores why early phases of small‑cap rallies have historically been led by lower‑quality businesses—and why that leadership may not prove durable without sustained improvements in underlying fundamentals.
Rather than attempting to track the index during periods of heightened enthusiasm, Ben outlines why a disciplined, quality‑focused approach may be better positioned to navigate concentration risks, distinguish short‑term momentum from long‑term value, and identify small‑cap businesses capable of compounding across full market cycles. As Ben notes, “While companies focused on AI and speculative technologies have dominated most headlines surrounding this small‑cap rally, we see other businesses in the mix that may be less attention‑grabbing but offer the potential for solid earnings growth and durable value over time.”
Access the full article here: The Small-Cap Rebound Is Real
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Index: The Russell 2000® Index is a free float-adjusted market capitalization-weighted index of the 2,000 smallest companies in the Russell Universe, which comprises the 3,000 largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. Morningstar U.S. Small Cap Quality Factor Index: Designed to provide efficient, strong exposure to the quality factor, as defined by the Morningstar Risk Model. The S&P 500® Index is a free-float market capitalization-weighted index of 500 of the largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. The indices are unmanaged, their returns do not reflect any fees, expenses, or sales charges, and they are not available for direct investment.
IMPORTANT RISK CONSIDERATIONS: Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small, medium, or large-sized companies may enhance that risk. Market Volatility: The value of equity securities may go up or down in response to the prospects of individual companies and/or general economic conditions. Local, regional, or global events such as war or military conflict, terrorism, pandemic, or recession could impact the portfolio, including hampering the ability of the portfolio’s manager(s) to invest its assets as intended.
