Why a Rotation May Be Coming: Francis Gannon on Yahoo Finance—Royce
article 01-06-2022

Why a Rotation May Be Coming: Francis Gannon on Yahoo Finance

Small cap's fourth quarter ended a strong year, but can the asset class beat inflation? Francis Gannon explains on Yahoo Finance.

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Co-CIO Francis Gannon was recently featured on Yahoo Finance explaining why he thinks earnings growth will expand and where he sees opportunities in small caps.

Watch the video here.

Francis detailed how the Russell 2000 posted its third consecutive year of double-digit positive returns, which has only happened twice before since the inception of the Russell 2000 in 1979. He added that cyclicals outperformed defensives in 4Q21, and detailed why he believes that small-cap opportunities can be found in Industrials, Financials, and Information Technology.

He added that small caps, as measured by the CRSP 6-10 Index, are the only major asset class that’s beaten inflation in every decade since the 1930s. He believes this may currently bode well for both the asset class and active management. In addition, Francis thinks that the combination of a growing economy and strong fundamentals may reverse small cap’s underperformance versus large caps.

Watch the video here.

Learn more about Francis Gannon here.

Important Disclosure Information

The thoughts and opinions expressed in the video are solely those of the persons speaking as of January 3, 2022 and may differ from those of other Royce investment professionals, or the firm as a whole. There can be no assurance with regard to future market movements.

The performance data and trends outlined in this presentation are presented for illustrative purposes only. Past performance is no guarantee of future results. Historical market trends are not necessarily indicative of future market movements.

Sector weightings are determined using the Global Industry Classification Standard ("GICS"). GICS was developed by, and is the exclusive property of, Standard & Poor's Financial Services LLC ("S&P") and MSCI Inc. ("MSCI"). GICS is the trademark of S&P and MSCI. "Global Industry Classification Standard (GICS)" and "GICS Direct" are service marks of S&P and MSCI.

Cyclical and Defensive are defined as follows: Cyclical: Communication Services, Consumer Discretionary, Energy, Financials, Industrials, Information Technology, and Materials. Defensive: Consumer Staples, Health Care, Real Estate, Utilities.

The (Center for Research in Security Prices) CRSP (Center for Research in Security Pricing) equally divides the companies listed on the NYSE into 10 deciles based on market capitalization. Deciles 1-5 represent the largest domestic equity companies and Deciles 6-10 represent the smallest. CRSP then sorts all listed domestic equity companies based on these market cap ranges. By way of comparison, the CRSP 1-5 would have similar capitalization parameters to the S&P 500 and the CRSP 6-10 would have similar capitalization parameters to those of the Russell 2000.

Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and / or Russell ratings or underlying data and no party may rely on any Russell Indexes and / or Russell ratings and / or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor or endorse the content of this communication. All indexes referenced are unmanaged and capitalization-weighted. The Russell 2000 Index is an index of domestic small-cap stocks that measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 Index. The Russell 1000 Index is an unmanaged, capitalization-weighted index of domestic large-cap stocks. It measures the performance of the 1,000 largest publicly traded U.S. companies in the Russell 3000 Index. Index returns include net reinvested dividends and/or interest income. The S&P 500 is an index of U.S. large-cap stocks selected by Standard & Poor’s based on market size, liquidity, and industry grouping, among other factors, and includes reinvested dividends. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index.

This material is not authorized for distribution unless preceded or accompanied by a current prospectus. Please read the prospectus carefully before investing or sending money. Smaller-cap stocks may involve considerably more risk than larger-cap stocks. (Please see "Primary Risks for Fund Investors" in the prospectus.)

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