Buy small caps for the recession? Yes, really

Look past assumptions

Recessions are normally a time to steer well clear of smaller companies.

They have underperformed in the first year of five of the eight economic recessions the UK has suffered since 1950. But other numbers suggest small caps could surprise investors on the upside in 2023. First, history suggests a very large chunk of the bad news is already in the price. The underperformance delivered by smaller companies in the UK this year relative to large caps has already exceeded what we experienced in each of those five previous recessionary selloffs. The Numis Smaller Companies Index, which includes dividends, is down 18% this year; the FTSE All-Share (total ret...