Small Caps Are ‘Asset Class of Choice,’ T. Rowe’s Page Says

(Bloomberg) -- T. Rowe Price’s Sebastien Page says that small-capitalization stocks, a sector that thrives in a growing economy, is a smart wager even though the delta variant outbreak has slowed the U.S. recovery.

“Small caps are the asset class of choice in a growth environment,” the firm’s head of global multi-asset said in an interview on Bloomberg TV’s Surveillance on Thursday. “We are slightly overweight small caps relative to large caps at the moment.”

While Page agrees U.S. growth will decelerate next year to about 4%, “that’s still a very high number, maybe the second highest in over a decade,” he said. “We have actually sold 1%, which is not a lot of our stock exposure relative to strategic targets, but we’ve added risk back into the portfolio by playing the recovery trade, which includes a long position in small caps.”

The Russell 2000 Index, a barometer of small-cap performance, is up more than 22% this year, below the almost 25% gain of the S&P 500.

With a nod toward the meme-fueled frenzy in some small stocks led by retail and day traders, Page warns investors to do their homework.

“You’ve got to be careful and focus on stock picking, especially in small caps,” he said. “You need to know what you are doing as you are picking stocks as opposed to getting index exposure.” 

©2021 Bloomberg L.P.