From Nasdaq:

The article discusses the valuation of different asset classes and sectors at the beginning of 2024. Large-cap sectors are mostly at fair value, except for Information Technology, which is overvalued, and Energy, which is undervalued due to falling oil and gas prices. Small- and mid-cap valuations are still cheap compared to their 10-year average, potentially making them undervalued.

Growth stocks, particularly the “Magnificent 7” (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla), saw strong earnings growth in 2023, contributing to their rich valuations. Analysts expect these stocks to experience an average gain of +11% in 2024, supported by expected margin expansion.

Goldman Sachs expects small caps (Russell 2000) to outperform the large-cap S&P 500, gaining 15%, supported by cheap valuations and a healthy economic growth outlook. However, a renewed upturn in interest rates could threaten small cap prospects due to their larger share of floating rate debt.

Despite potential risks, if interest rates hold steady or drop, it could be a positive for small caps and interest-rate sensitive sectors. It’s important to note that the information provided is for informational and educational purposes only and should not be construed as investment advice. Investors should undertake their own due diligence and seek advice from securities professionals.



Read more: Valuations and Economy Support Small-Cap Upside