The omicron Covid variant appears to be putting a dent in U.S. small businesses. One-third of them posted a sales decrease in the in the week ended Jan. 9, according the U.S. Census Small Business Pulse Survey.
The Survey also showed that 28% of small businesses were having difficulties hiring employees.
As for small-cap stocks, the Russell 2000 index gained 12% last year, compared to 27% for the large-cap S&P 500. Some analysts say that helps set the table for small-cap stocks to shine.
Small-cap stock valuations last month hit a 20-year low compared with large caps. And that leaves small-caps poised for stronger gains over the next decade than large caps, according to Bank of America.
The forward price-earnings multiple of the Russell 2000 totaled 0.75 times that of the Russell 1000 predominantly large-cap index in December, Bank of America equity strategist Jill Carey Hall said in a commentary Wednesday.
That’s more than 25% below the long-term average of 1.02 times and the cheapest since 2001, she noted.
Just as the “2000s were a strong decade for small-caps despite what was ultimately a negative decade for large-caps, … the Russell 2000 could see high-single-digit annualized returns over the next decade versus low-single-digit annualized returns for the Russell 1000,” Hall said.
“The fund’s diversified portfolio and low fee should help it maintain its performance edge over its average category peer in the long run,” Morningstar analyst Lan Anh Tran wrote last year.