Looking ahead, some argue that smaller companies will outperform in a rising rate rate environment once the Federal Reserve eventually hikes rates as they are less restricted to borrowing costs.
However, Bespoke Investment Group wanrs that the S&P 400 MidCap Index is trading near extreme overbought levels, which have contributed to pullbacks of between 1% to 8% over the past two years. For instance, MDY has a 19.1 price-to-earnings ratio, compared to the SPY’s 17.3 P/E.
For more information on middle-capitalization stocks, visit our mid-cap category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of DON and SPY.