arthur Guest
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Posted: Fri Dec 31, 2004 6:17 pm Post subject: Large and Small Caps |
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The S&P 100 to Russell 2000 ratio shows large cap stocks, in general, underperformed small cap stocks, in general, over the past six years. However, if the U.S. dollar continues to stay weak in 2005, then U.S. multinational firms, which are typically larger firms, should earn higher profits, from narrowing trade imbalances (both exports and imports) and favorable foreign exchange rates. Small cap stocks benefited from lower interest rates, which have a more powerful effect on smaller firms, and fewer operating restrictions, e.g. pensions, greater plant & equipment costs, large contracts, etc., which provided greater flexibility when downsizing. Consequently, larger caps, in general, may outperform smaller caps, in general, in 2005.
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