April 12, 2021
Following periods of sharp market decline, historically there have been signs of recovery within 18 months after the initial event. However, these signs have varied depending on the area of the market.
Historically, small-cap equities, as represented by the Russell 2000® Index, tended to recover more strongly, outperforming the broader market and large-caps. This trend could be seen, in a historical context, three months following a period of market decline, but also continue after six months, 12 months, and even 18 months out.
Source: Morningstar. Data as of May 14, 2020.
Past performance does not guarantee future results. Charts shown throughout are for illustrative purposes only and not meant to predict actual results. Chart is for illustrative purposes and not representative of the performance of any specific investment.
*Outperformance of cumulative return of the Russell 2000 Index versus the Russell 1000 Index 18 months following each period of market decline noted above.
What this means for investors
We believe it is important for investors to remain focused on the long term. In the past, small-caps' performance has generally led that of larger-cap stocks during times of recovery, and small-business momentum has rekindled as the economy shifted into expansion. While past performance is no indicator of future results, we believe there may be a potential for recovery and stronger performance in the small-cap space following recessionary periods.