Invest in Small-Cap Stocks for a Big Return in 2023

The start of 2023 has been an encouraging one for investors, with the S&P 500 rallying 8.5% in January — the strongest start to a year since 1987. Every major asset class finished January in the green, including cash, Bitcoin and investment-grade bonds.[0] The Nasdaq-100 saw an increase of 10.6%[0]

This positive trend could continue for the next 11 months or more and make investors who understand it a lot of money.[0] History shows that it’s not common for the stock market to experience two consecutive down years — it’s only happened twice since 1950 — and the S&P 500 returned 26.4% in 2009 despite spiking unemployment and terrible consumer confidence.[0]

Ariel Investments conducted a study that revealed that nearly 98% of the time, small-cap stocks outperform large-cap stocks when both are experiencing low prices and battered values. This makes sense, as it’s an observed fact that small-cap companies as a group outperform large-cap stocks after market crashes.

The US added 517,000 jobs in January, massively beating estimates and bringing the unemployment rate down to 3.4%.[1] This tight labor market could fuel wage increases, which ultimately contributes to the pace of inflation.[2]

Benzinga is tracking a handful of small-cap and micro-cap opportunities, including Sensate, a self-care startup that’s grown revenue by 363% in a year even as larger-cap companies floundered.[3] With the optimism of the stock market in 2023 and the potential of small-cap companies, investors should treat the current situation as a buying opportunity.[4]

0. “Why History Says 2023 Will Be A Banner Year For Stocks” Benzinga, 8 Feb. 2023, https://www.benzinga.com/trading-ideas/long-ideas/23/02/30819221/why-history-says-2023-will-be-a-banner-year-for-stocks

1. “The Stock Market Is Rallying. Will It Last?” Money, 8 Feb. 2023, https://money.com/will-stock-market-rally-last/

2. “Why the stock rally could fizzle out and burn bullish investors” Business Insider, 6 Feb. 2023, https://www.businessinsider.com/investing-stock-rally-markets-fizzle-bullish-dalio-blackrock-bofa-street-2023-2

3. “Why History Says 2023 Will Be A Banner Year For Stocks By Benzinga” Investing.com UK, 8 Feb. 2023, https://uk.investing.com/news/stock-market-news/why-history-says-2023-will-be-a-banner-year-for-stocks-2908244

4. “History Says the S&P 500 Could Soar in 2023 — 2 Perfect Stocks to Buy Before the Rebound” The Motley Fool, 10 Feb. 2023, https://www.fool.com/investing/2023/02/10/sp-500-could-soar-in-2023-2-perfect-stocks-to-buy/