5 Stock Market Forecasts Next 6 Months

1. Low Market Cap Stocks will Outperform

With the US economy remaining resilient more than ever, it might be time to look closely at small-cap stocks benefiting from secular market grinds. Beaten-down stocks of smaller companies are increasingly making a comeback by offering an opportunity to gain exposure to the equity market rally at highly discounted levels.

The S&P 500 small-cap index is already up by more than 8% from its May low, affirming growing interest in small-cap companies with tremendous growth potential. Unlike in the first half of the year, where large-cap stocks remained the key drivers of the overall market, small caps are helping prop the burgeoning bull market.

According to Chris Marangi, Co-CIO of Value at Gabelli Funds, investing in US small-cap companies is still possible instead of seeking value in emerging markets.

“If the economy is going to have a soft landing, the cyclical companies that have been beaten up recently are going to do better. Irrespective of what happens with inflation and rates, we will find good companies run by good management and attractive valuation; you will find those in the small-cap area,” Marangi said in an interview with CNBC.

Some of the small companies doing well include Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), up 69.1% for the year; Rambus Inc. (NASDAQ:RMBS), up 64.9%; Shockwave Medical, Inc. (NASDAQ:SWAV), up 44.1% and Saia, Inc. (NASDAQ:SAIA), added 48.8%.

As long as Wall Street remains optimistic about the economy’s health, small-cap stocks will likely outperform the overall market.

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