UBS analysts predict robust potential for small-cap shares within the coming months. Their analysis highlights a historic correlation between small-cap efficiency and Treasury yields.
“Over the previous 12 months, Small Cap shares have outperformed when Treasury yields have declined,” states the UBS word. Conversely, small caps have underperformed in periods of rising yields. Traditionally, when this relationship deviates, a correction shortly follows.
UBS factors to an occasion in early February the place small caps considerably outperformed giant caps “following such a disconnect.” They word an analogous state of affairs presently unfolding, with giant caps outperforming regardless of falling rates of interest since Might.
“Since Might 30, Massive Caps have outperformed by 6.2% regardless of falling rates of interest, a a lot bigger disconnect than the one skilled earlier within the 12 months,” says the financial institution.
“This represents the potential for mid- to high-single-digit Small-cap outperformance over the close to time period,” concludes the UBS report, suggesting a major upswing for small-cap shares within the close to future.
