‘It Could Be A Very Ugly Reporting Season For Small-Cap Stocks’: Bad News For Stock-Market Bulls

Written by Ann Brown
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It’s not a good time for the small-cap stocks. According to analysts, the first quarter was not good for these stocks. They have plummeted at an unprecedented pace since the beginning of the year and Wall Street is estimating constituents within the small-cap focused Russell 2000 index will enter an earnings recession in the first half of 2019.

“What really concerns me is the performance of small and mid cap stocks,” Carlos Dominguez, chief investment officer at Element Pointe Advisors, told MarketWatch.

Steven DeSanctis, small-and-mid-cap equity strategist at Jefferies Financial Group, added that “it could be a very ugly reporting season” for small-cap stocks.

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“There is no question that estimated growth is falling fast across size, sector, and style, as companies have taken a more conservative stance to 2019,” DeSanctis said.

So what’s behind the drop? Experts point to the rising costs for labor, services, and supplies.

There could be good news though, some analysts say that small-cap stocks are likely to rebound as the benefits investments, such as new technology, will boost their bottom lines.

“Analysts are still projecting full-year earnings growth, largely on the belief that the U.S. economy will rebound in the last six months of 2019, powering small-cap EPS to a rise of 12.6% in the fourth quarter,” MarketWatch reported.