On The Money
This is what needs to happen for UK smaller company shares to bounce back
Feb 22, 2024
Exploring catalysts for UK smaller company shares to bounce back amidst interest rate rises and market challenges. Analysis of investment philosophy and growth strategies, along with identifying undervalued stocks for potential recovery. Insights on positive economic indicators and long-term outperformance of smaller companies.
22:29
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Quick takeaways
- UK smaller company shares face challenges due to rising interest rates and bear market conditions.
- Revival of UK smaller company shares depends on interest rate decline, cheap valuations, and sustained inflows into the market.
Deep dives
Challenges in Investing in UK Smaller Companies
Investing in UK smaller companies has faced significant challenges due to rising interest rates leading to a bear market, with a 46% relative drawdown in the small cap market. Differences in sector performance between FTSE 100 and small caps, alongside volatility in FX and gas prices, have further impacted the smaller company shares. The cycle of underperformance due to sentiment and momentum adds to the complexity, with prolonged consecutive outflows affecting the market.
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