Abstract
In <b>Small-Cap Allocations: Timing the Entry</b>, in the September 2020 edition of <b><i>The Journal of Portfolio Management</i>, Eric Sorensen</b> and <b>Sebastian Lancetti</b>, both of <b>PanAgora Asset Management</b>, assert that economic conditions now may favor a small-stock premium. They analyze the performance of small-cap stocks since 1965 and identify connections between small-cap stocks and moves in interest rates, market volatility, and the broader economy. They speculate that although large-cap stocks have outperformed small-caps during the past decade, conditions are ripe for small-caps to reassert themselves. The key factors include: 1) the very low level of long-term interest rates and the potential for interest rates to rise; 2) the anticipated economic recovery following the Covid-induced recession; and 3) the current relatively cheap valuations of small-cap stocks. <b>TOPICS:</b>Portfolio theory, portfolio construction, wealth management
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