Are small caps suffering indigestion?

The relative weakness in the small-cap market shows the market is having trouble digesting the extraordinary level of recent equity issuance, explains Franklin Templeton small cap manager Richard Bullas.

The FTSE 100 has rallied smartly over the past three weeks to within touching distance of its high for the year, buoyed by the re-emergence of takeover activity in large-cap stocks. Further down the market capitalisation spectrum however, it is a different story, with both the Mid 250 and the Small Cap index losing ground in April and trading well below their February peaks. Indigestion Some of the relative weakness in small and mid-cap stocks is clearly a rational reaction to the bull market enjoyed by these areas of the market over the past two years and the fact that, as a resul...