This is in large part because the Russell 2000 index of small-caps is"more cyclically biased" than many of the bigger indexes, says Philip Lawlor, head of global investment research at FTSE Russell, which runs the 2000. That is, its stocks are more closely linked to the health of the economy.
Lawlor says 2021 could bring a"double whammy" for small-cap shares if the Democrats choose to take a tougher line on the big tech firms.Yet it won't all be plain sailing. The US, like many countries around the world, is suffering a sharp rise in coronavirus cases. States have introduced new restrictions, hitting businesses.in the previous week, the biggest rise since March.
Yet markets are hopeful about smaller companies' future earnings, which is their focus."They're much more concerned about what's going to be happening in 6 months, 9 months, 12 months' time," says Lawler.