In a recent commentary, financial analyst Louis Navellier challenges the traditional investment advice to “sell in May and go away,” arguing that this year presents a unique opportunity for small-cap stocks. Historically, this saying originated in 19th-century London but has shown mixed results in modern times. Over the past 20 years, the S&P 500’s performance in summer months has been lackluster, with August averaging returns of just 0.05% and September suffering a decline of 0.67%.
Currently, the small-cap Russell 2000 index is outperforming the S&P 500, rising 31% over the past year compared to 23% for large caps. Year-to-date, small caps have gained 11%, outpacing the S&P 500’s 7.7%. Navellier notes that small-cap companies typically have less global exposure, making them more resilient in a growing U.S. economy. Additionally, these stocks still look undervalued, representing only 4.6% of the total Russell 3000 market cap, below the historical average of 7.6%.
With July historically being a strong month for small-cap performance, Navellier suggests that investors should stay engaged with this segment rather than retreating to the sidelines. His recommendations are backed by an analysis of current market trends, making a case for focusing on small-cap investments this summer.
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