"Strategies for Navigating the Volatile Small-Cap Market in 2024"

The Russell 2000 index, which tracks small-cap and midcap stocks, may seem cheaper than last year with a reported P/E ratio of 11.8, but this figure is misleading as it excludes unprofitable companies. When accounting for these, the true P/E ratio is 27.1. Additionally, the economy is shifting towards a winner-take-all model, where the largest corporations dominate profits, leaving smaller companies with a shrinking share. This trend, coupled with the lackluster earnings growth among small- and midcap stocks, suggests that the S&P 500, which is comprised of larger companies, is likely to continue outperforming the Russell 2000.