Small-cap companies remain fundamentally healthy

Francis X. Morris
Chief Investment Officer — Core Equity

Small-cap companies remain fundamentally healthy

The outlook for corporate profitability in 2015, what we’re seeing right now are some very good signs fundamentally in terms of what affects small-cap sales and profits. First of all, we’re seeing stronger GDP. The most recent print was very strong and most economists have 2015 at roughly 3% GDP growth. That usually translates into higher sales and higher earnings and we think that will continue to play out as we move throughout 2015. So, that’s an important part of what will drive small-caps, that ability to meet or exceed expectations. Right now it’s very important, given where valuations are, that companies meet and exceed expectations.

Small-cap stocks could benefit from rising interest rates

We’ve had a constructive view with respect to rising rates and our constructive stance comes from the viewpoint, we feel that when and if rates go up, it will be for the right reasons, and that’s because there is better economic activity here in the U.S. And U.S. small-caps will directly benefit from that as over 80% of their operations are generated primarily domestically here in the U.S.

The views expressed represent the Manager's assessment of the market environment as of January 2015, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice and may not reflect the Manager's views.

Certain statements made here are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA). A forward-looking statement is a statement that is not a historical fact and, without limitation, includes any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words like: “believe,” “anticipate,” “expect,” “estimate,” “project,” “will,” “shall,” and other words or phrases with similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, trends in our businesses, prospective services or products, future performance or financial results, and the outcome of contingencies, such as legal proceedings. The protection afforded by the safe harbor for forward-looking statements provided by the PSLRA is claimed hereunder.

Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the results contained in the forward-looking statements. Investors should not place undue reliance on forward-looking statements as a prediction of actual results. In addition, we disclaim any obligation to update any forward-looking statements to reflect events or circumstances that occur after the date of this document.

GDP refers to gross domestic product, which is the measure of all goods and services a country produces.

Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.

Information is as of the date indicated and subject to change.

Carefully consider the Funds' investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Funds' prospectuses and their summary prospectuses, which may be obtained by visiting or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.


Investing involves risk, including the possible loss of principal.

Past performance does not guarantee future results.


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