Published January 12, 2024
We are a couple of weeks into the new year and indexes are generally flat – one week down, one up – after a monster rally to end 2023. The indexes remain at or very near new all-time highs, except for small and microcap stocks – e.g. the companies most likely to suffer from the sharp rise in interest rates. As shown in the following chart, small cap companies hold far more floating rate debt, debt that will have to be refinanced at potentially much higher interest rates. Large cap companies, by contrast, have largely locked in cheap debt maturing well out in time – thus, they are far less impacted by the surge in interest rates. This debt profile weighs down the small cap index. (more…)