BofAML's Outlook for Small Caps

The video discusses the perception of small caps as more insulated from trade risks due to their domestic focus, with 21% foreign sales compared to 30% for the S&P 500. However, foreign exposure for small caps is rising, while it is falling for large caps. Small companies face challenges from trade and tariffs, impacting their earnings. They tend to underperform during risk-off periods and geopolitical strife. Despite being lower in quality, small caps are expected to outperform, with the Russell 2000 benchmark showing a trend towards lower quality.

What are the perceived advantages of small caps in relation to trade risks?

How has the foreign exposure of small caps changed in recent years?

What challenges do smaller companies face regarding supply chains and pricing?

In what situations do smaller stocks typically underperform?

What is the expected performance trend for lower quality stocks this year?