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Trade uncertainty darkens U.S. small caps outlook


Added 05-20-19 01:03:02am EST - “Shares of smaller publicly listed U.S. companies have fallen more on recent U.S....” - Reuters.com

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Posted By TheNewsCommenter: From Reuters.com: “Trade uncertainty darkens U.S. small caps outlook”. Below is an excerpt from the article.

NEW YORK (Reuters) - Shares of smaller publicly listed U.S. companies have fallen more on recent U.S.-China trade tensions than larger corporations and could face an even rougher road as the year wears on unless the prospects for economic growth improve.

Wall Street has been forecasting a return to growth for the S&P 600 index of small cap stocks in the second half of 2019, but an intensifying trade battle between the world’s two biggest economies puts these hopes into doubt.

Because they depend less on overseas sales than bigger companies, some investors say small caps may be less vulnerable in a trade war situation.

But if rising tariffs boost import prices to the extent that it slows U.S. economic growth, then smaller companies, which often have less financial cushion than big multinationals, could be badly hurt. And since many U.S. companies use overseas suppliers, tariff hikes could make imported goods too pricey.

“Because they have more domestic sales it doesn’t mean they’re totally insulated,” said Jill Carey Hall, U.S. strategist at Bank of America Merrill Lynch. “If we don’t get a resolution on trade, you don’t necessarily want to own small caps. They tend to fare more poorly in risk-off environments.”

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