Jessica Menton

speaker

431 appearances 12 recordings 1 series first heard Nov 2018 last heard Apr 2019

Jessica Menton’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · Small Cap Stocks: Edging Toward a Bear Market · 13 Dec 2018 podcast

And we are in a rare situation where something that we saw earlier this year, we were in a correction around February and March. voice-verified

And it's something that you don't tend to see small cap stocks and larger cap stocks move in tandem like this. voice-verified

And a lot of that's driving is because, for one, both large cap and small caps have lower earnings projections going into the new year, especially in the first quarter, because we're not going to see those tax benefits from those corporate tax rates like we did earlier in 2018. voice-verified

So that's why we're seeing a lot of those downgrades there. voice-verified

But that's something both of them are facing right now. voice-verified

Absolutely. voice-verified

And that's really the key there between the driver of larger cap stocks and smaller cap stocks. voice-verified

If you think about the path the Federal Reserve is on right now, raising interest rates, there are questions going into next week ahead of their meeting about whether they'll be a little bit more dovish or, say, less aggressive going into next year, which you think would... voice-verified

potentially benefit smaller companies, but we're still in a higher rate environment and those companies hold more debt. voice-verified

So if borrowing costs are still going up, even if it is at a slower pace, that's going to impact them more than when it comes to larger companies. voice-verified

And when you look at, say, the S&P 500, voice-verified

and the amount of multinationals that are in the S&P 500 that have exposure overseas. voice-verified

If the Fed begins to be a little bit more dovish next year, that could take some pressure off of the U.S. voice-verified

dollar, which essentially helps those companies because it makes... voice-verified

exports cheaper for foreign buyers. voice-verified

So it's more attractive to them. voice-verified

So it's interesting just looking at the dynamics there, because as far as the analysts that I've spoken with, they still think that a more dovish Fed is still more beneficial when you're looking at those large cap companies. voice-verified

It's interesting because there's so many different forces at play right now when you're looking at the Fed, when you're looking at the trade tensions, and when you're looking at those smaller companies. voice-verified

But small caps are correlated to the rising and falling of an economic tide. voice-verified

Now, that's not necessarily saying that we're there right now. voice-verified

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