How 2020 May Differ For Small-Cap Stocks—Royce
article , video 02-11-2020

How Will 2020 Be Different From 2019?

Five small-cap specialists on how they think this year will be different.


Chuck Royce: Increased Volatility

I think volatility is going to pick up. We had very low volatility throughout the year last year. We have virtually a straight-up market. So I don’t think we’ll have a straight-up market. I think we’ll have a 10% plus correction in the next half a dozen months.

Charlie Dreifus: Stronger Economy

I think people are going to be surprised by the strength in the economy. The GDP is going to grow more rapidly than people assume, and, with that, we’re going to get rising interest rates, at some point, perhaps not till late in the year. 

Mark Rayner: Reduced U.K. Political Risk

I think I’m going to have to say reduced political risk in the U.K. Those political risks have really been building over the last few years. One, we had Brexit. And the other issue was we were obviously going to have a general election to sort that out. So the election that we had in the U.K. in December, I think, didn’t solve all the issues, but I think much more clarity now on Brexit. Brexit is going to happen. What the exact trading relationship will be, will be decided in 12 months, but I think big reduction in political and economic risk in the U.K.

Jay Kaplan: Election Trepidation

Well, we have a presidential election year. Right now, the Democratic candidate is about as clear as mud. We don’t know who that will be. The Super Tuesday Primaries are coming. There may not be a clear winner. So there could be a brokered convention, which we haven’t seen in quite some time, and that ought to create trepidation and headlines and volatility, and volatility can be really good for a small-cap contrarian value investor.

Francis Gannon: Weakened Dollar

So one of the hallmarks of the market in 2020 is going to be the fact that you should see a weaker dollar, based clearly on the fact that many of the trade deals that the market worried about in 2019 are going to be behind us and that we should see many of the economies outside of the United States start doing better. We’re already starting to see some green shoots in terms of economic data, but as you see many of those economies start to do better, their currencies should strengthen on a relative basis and, therefore, ours should weaken, all of which would be very positive for small-cap companies, industrial businesses in many of the ways that we have been positioning our portfolio over the past several years.

More Small-Cap Perspectives


Important Disclosure Information

The thoughts and opinions expressed in the video are solely those of the persons speaking as of January 13, 2020 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.

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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