October 04, 2002

Our best guess is that the smaller cap stocks will continue to gain on the larger cap issues. The reason for this forecast is that we do not believe that Bush will push for permanent changes in the tax code in the near future nor that Alan Greenspan will change his monetary policy. We explain the recent surge in the large-caps as a flight to quality. With the increased uncertainty the larger caps seem to be the safer alternative. Another factor that we believe is favoring the larger caps is the acceleration of the credit squeeze. Notice the widening spread in the corporate market. To the extent that the smaller caps are riskier than the larger caps, the credit squeeze will affect them the most. The relative ranking of the mid and small stocks is less precise and we have less confidence in our forecast. Notice that our model is suggesting a gradual shift moving down the size scale. In the interim, the large size companies should lead the market as the rotation towards the smaller caps takes place. (full article attached)

You must have an active account to view these reports. You may register for a trial here

Download Complete Report in PDF Format

Download Complete Report in Word Format