U.S. small-cap stocks, which have been under pressure in recent months, may experience a turnaround in June. Several factors suggest a comeback for this stock class:
1. Seasonal Opportunities
Historically, June often offers good opportunities for small-cap stocks. This stock class has frequently experienced a rally in June, attributed to seasonal effects.
2. Technical Signals
Technical analyses indicate that small caps are in an environment conducive to a comeback. Buy signals from technical indicators could encourage investors to invest in these stocks.
3. Exaggerated Pessimism
The current exaggerated pessimism towards small caps could act as a contrarian indicator. When the sentiment is too negative, it can lead to a correction that offers investors opportunities to invest in these stocks.
4. Interest Rate Shift and Valuations
The interest rate shift could create a more attractive environment for small caps. The valuations of these stocks have decreased in recent months, making them more appealing again. The risk premium of small caps has currently disappeared, which may prompt investors to take a closer look at them.
5. Diversification and Market Development
For investors looking to diversify their portfolios, small caps could be an interesting option. Monitoring the market development and looking for opportunities in this stock class is particularly relevant to benefit from potential rallies.
6. Comparison with Large Caps
Small caps have performed worse than large caps in recent months, leading to undervaluation. This could be a compelling argument for investors seeking growth opportunities.
7. Global Market Changes
As investors increasingly turn away from U.S. markets and invest in European stocks, this could also direct attention to small caps. Improved prospects for the European economy could indirectly influence U.S. small caps.
In summary, both seasonal effects and technical and fundamental factors provide reasons for investors to pay closer attention to small-cap stocks in June.