Capital Markets Spring 2020

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Smaller Capitalization Stocks Look Attractive Valuation

• Underperformance has compressed small cap valuations as compared to history

• Small caps underperformed YTD (through 3/31/20) but have historically outperformed by ~1,400 bps in the 12 months following the trough of a recession*

I

II

Price-to-Earnings Russell 2000 / Russell 1000

Small Caps Have Outperformed in Recoveries Performance One Year After Recession Trough

100% 120% 140% 160%

38%

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Large Caps More Attractive

24%

IV

0% 20% 40% 60% 80%

Median

Small Caps More Attractive

V

S&P 500

Russell 2000

1994

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1998

2000

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2008

2010

2012

2014

2016

2018

2020

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Source: FactSet. P/E is price divided by earnings per share over last 12-months. *Based on S&P 500 vs. Russell 2000 performance after stock market troughs during the past three recessions: 12 months following 10/31/90, 9/30/01, 2/28/09, respectively. The performance data quoted represents past performance, which is not an indication or a guarantee of future results.

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