How Should Global Equity Investors Look At Small Caps Now?

Looking at small caps at the global aggregate level can be misleading. Small caps are cheap and oversold in the DM universe, but expensive and overbought in EM. Watch closely for clarity on the coming recession to upgrade DM small caps to overweight relative to DM large caps. Lighten up small cap exposure in the EM universe. For investors in the US small caps, the S&P 600 is a more beneficial benchmark for asset owners, while the FTSE Russell 2000 is an easier-to-beat benchmark for asset managers.