Cédric Le Berre

As 2023’s concentrated market rally is extending into 2024, equity investors are worried about a potential consolidation or pullback.

As the “Magnificent 7” generate risks in the segment, diversification within equities becomes key. Global small- and mid-cap (SMID) stocks, represented by the MSCI World SMID Cap Index, are emerging as a compelling option.

After decades of disappointment, Japanese equities are back with a bang. The Nikkei 225 is up 41% year-on-year and 15% since the start of 2024.

Japan’s equity markets have outpaced other major developed market equities in both 2020 and year-to-date in 2021 as the world seeks to transition to a post-pandemic recovery.

SMID-cap equities are poised to mean revert and outperform over the next three to five years. The best time to allocate to SMID caps is when earnings are “depressed”, i.e. now.