Sometimes, Smaller Is Just Better

Paul Allison

2 months ago1:39 min

Sometimes, Smaller Is Just Better

A common narrative used to explain the fearsomeness of bear markets is that they’re a story told in two halves. The first sees a sharp valuation correction as markets start to anticipate tougher times ahead – that’s been 2022. The second is all about how tough those times actually get – that’ll be 2023.

And it’s an interesting narrative when you look at America’s smaller publicly traded companies. The chart shows the price-to-earnings (P/E) ratio for the S&P 600, an index of small-cap US firms. The ratio, commonly used to determine a stock’s valuation, is at levels seen only during the worst economic times, like the Covid crisis of March 2020 and the global financial crisis of 2008-09.

But there’s a plot twist: some major economic thinkers – Goldman Sachs is one of them – have recently s

Limited introductory offer

Subscribe Now 50% Off

Get full access to daily stories, insights, deep-dives, interviews, podcasts, and more

Have an account? Log in