There’s growing acknowledgement among professional market observers that small-caps could be primed to outperform in 2024. In its U.S. Equity Strategy report, published on Tuesday, Jefferies estimated that the Russell 2000 will jump 11% next year, with earnings per share growth of 6.9% — percentages that exceed the comparable forecasts for the large-cap S&P 500.
The bank also noted that small-caps are currently historically inexpensive relative to large-cap equities. As measured by price-to-sales, the S&P 500 trades at 7.7x, while the Russell 2000 trades at just 1.8x. That could highlight opportunity with QQQS, which allocates a third of its weight to value stocks.
At the sector level, healthcare is one of the groups favored by Jefferies in the small-cap universe. That’s meaningful to QQQS investors, because the Invesco ETF allocates more than 56% of its weight to that sector. Given the history of consolidation in the small-cap healthcare space, should mergers and acquisitions activity perk up next year, that could be another catalyst for QQQS.
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