Archive Category: 10X Stocks Archive

Log In Enter your username and password below USERNAME OR EMAIL PASSWORD Forgot Password?Register Remember...

As investors living in 2023, it’s difficult to be surprised. The pandemic, the bubble that followed, the bear market we’re in now and the banking crisis that erupted in mid-March have all dampened our sensitivity to even the most out-of-the-blue developments and news flow. Yet, this past weekend’s news from OPEC truly surprised the market. Fortunately, our portfolio was on the right side of the price action that followed as everyone else scrambled to adjust.

Today, I want to talk about small-cap stocks… Over the long arc of market history, small-cap stocks have outperformed large-cap stocks. Though that relationship was flipped on its head during the last bull market — something I’ll get back to shortly.

Last week, I made you do mental gymnastics on the topic of duration risk, also called interest rate risk. Put simply: Duration risk quantifies the degree of “headwind” an asset’s price will face if interest rates rise. In the fixed-income world, putting credit (aka default) risk aside, duration is the sole driver of a bond’s price. But in the equity world, there are many other factors at play. Here, “growth” stocks are mostly considered “long-duration” assets. They are more sensitive to interest rate moves. Specifically, when interest rates are rising, most growth stocks suffer a much stronger headwind against price increases.

The market has grown especially volatile over the past week or so. I’m writing today to encourage you to remain calm and patient. Sure, you can read up on what’s happening — an informed investor is a good investor. Though I’ll caution you against making any knee-jerk reactions to either the headlines or price action. We’re in a reactionary environment right now. The failures of Silicon Valley Bank, Signature Bank and Silvergate Capital have not only sparked concern over the stability of the U.S. banking system, but more importantly have increased uncertainty over what the Federal Reserve will do next with interest rates.