During 1Q19, the small cap stock asset class slightly outperformed large cap stocks but underperformed mid cap stocks. After exiting a volatile 4Q18 marked by steep drops in asset prices and anxieties about the impact of higher interest rates, trade tensions, and slowing global economic and corporate profit growth, markets entered the first few days of 2019 still in a cautious mode. The market trajectory started changing, and markets reacted very positively, once the FOMC chairman assured markets of an environment of low inflation and a pause in interest rate raises coupled with an easing monetary environment. This was also accompanied by signs of progress in trade negotiations with China. Though global growth and corporate profit growth numbers continued to disappoint, markets started looking beyond them to a potential future in which trade and tariff issues are resolved, monetary stimulus in China and an easier Fed in the US revive global economic growth, and a low inflation and interest rate environment revive corporate profit growth later in the year.
In the small cap space, the Technology, Real Estate, Energy, and Materials sectors outperformed. Financials, Industrials, and Consumer Staples underperformed. Though the Saratoga Small Cap Portfolio’s overweight to Technology and underweight to Financials helped relative performance, our underweight to Energy & Materials and overweight to Industrials hurt relative performance.___________________
Information contained herein was obtained from recognized statistical services and other sources believed to be reliable and we therefore cannot make any representation as to its completeness or accuracy. Any statements not of a factual nature constitute opinions which are subject to change without notice.
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