Krosby also argues that the lingering concerns in junk bonds seeped into small-cap stocks – companies with speculative-grade ratings are typically smaller companies.
Additionally, in a year marked by volatility, smaller companies with a less certain outlook were seen as riskier plays, compared to more established companies.
Nevertheless, Krosby believes that small-cap stocks could shine next year as domestic growth picks up. Analysts anticipate Russell 2000 company earnings to grow 9.8% in 2016, whereas S&P 500 companies are expected to see growth of 7.6% next year.
“Very often, small and midcap pick up when the economy is emerging from a downturn,” Krosby added. “We had that and then we started to get pullback. Now you’re waiting for another breath.”
iShares S&P Small Cap 600 Value Index
For more information on small-capitalization stocks, visit our small-cap category.
Max Chen contributed to this article.