Many IR teams have had a tough time marketing to new investors over the last couple of years given the intense focus on mega-cap tech and AI stories. But those of you who have been out there telling your story diligently and working hard on maintaining relationships may now be seeing some rewards.
The bull market has begun to well and truly open out with small-cap and cyclical stocks benefiting at the expense of former winners. Driving that shift is good news on inflation and expectations of rate cuts, as well as the growing belief that Donald Trump will win the US presidential election in November.
‘Optimism about the potential for rate cuts appears to be driving a surge in small-cap indices on both sides of the Atlantic,’ says Steve Clayton, head of equity funds at Hargreaves Lansdown, in a note on Wednesday.
‘This is especially the case over in the States where the Russell 2000 small-cap index has outpaced the S&P 500 index by 10 percent in the last week. Smaller companies tend to be more geared to their local economies and in the US at least, often have higher levels of debt, making them more sensitive to lower rates.’
Reiterating the bullish sentiment, Bank of America’s newly released fund manager survey for July finds that 68 percent of respondents expect a soft landing for the global economy, compared to just 11 percent who predict a hard landing (and 18 percent who forecast no landing at all).
In addition, 56 percent say the first Fed rate cut will take place in September and 84 percent see at least two rate cuts over the next 12 months. Meanwhile, higher inflation has been replaced by geopolitical conflict as the biggest perceived tail risk for the buy side.
Amid this backdrop, investors are rotating into a wider variety of names. But, just as some fund managers are arriving too late to truly benefit from this rally, some companies will also be missing out. The speed with which the market shifts underlines the importance of sticking at investor outreach during lean periods, to ensure you are well positioned when sentiment turns.
How are your conversations with investors changing as inflation falls and rate cuts edge closer? Get in touch and let us know at [email protected] or on LinkedIn.
