Liontrust's Cross: Stepping off the small-cap rollercoaster

The provision of supportive monetary conditions has fuelled a value rally, but now there are signs that higher quality companies with long-term secular growth potential are back in favour.

The headline performance of small-cap indices has dropped off this year after stellar performance in 2012 and 2013. But a more subdued environment could be better for long-term stockpicking than the boom and bust rollercoaster which appears when swings in investor sentiment dominate. Since the Fed implemented the long-awaited tapering of its asset purchases, risk appetite has moderated. The differential between the gains made by the small-cap index and the improvement in trading conditions reported by its underlying companies has narrowed. Many of the companies that contributed the mo...