Francis Gannon Pens Commentary Article For Wealth Management—Royce
article 03-01-2021

Francis Gannon Pens Commentary Article For Wealth Management

Co-CIO Francis Gannon explains his long-term optimism for small caps in an article he wrote for Wealth Management.


Co-CIO Francis Gannon published an article in Wealth Management titled "After a Roller Coaster Year, What's Next for Small Caps?” on February 26, 2021 making his case for why he believes volatility can benefit active small cap managers.

Read the article.

Francis detailed in the article that he sees small caps outpacing large caps in 2020’s bullish fourth quarter as a sign of a substantial leadership change. He believes there will be a small cap correction because small caps have experienced a decline of at least 10% in 84% of the past 25 calendar years. He added that small caps are also likely to advance over the next several years because of all rolling three-year return periods since 1945, 88% produced positive returns for small caps, according to the Center for Research into Security Prices. He noted that below average valuations caused by 1% Treasury bond yields, an accommodative U.S. Federal Reserve, and recovering economies in the U.S. and most of the globe may cause the probability for this to be higher.

“Regardless of the shape our ‘new normal’ takes, 2021 could not only create potential advantages for disciplined active management, but it should also be a rewarding year for selected cyclical small cap stocks,” Francis wrote.

Read the article.

Learn more about Francis Gannon here.

Important Disclosure Information

Mr. Gannon’s thoughts and opinions concerning the stock market are solely their own and, of course, there can be no assurance with regard to future market movements. No assurance can be given that the past performance trends as outlined above will continue in the future.

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.

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 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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