Deepening supply chain disruptions due to the Russia-Ukraine war and a possible fourth COVID-19 wave in China could mar the growth of big companies with exposure to global markets. Furthermore, since the shares of many of these companies still look overvalued, they could suffer a downtrend.
Because increasing efforts will likely be made to prioritize domestic production going forward, micro-cap stocks are likely to outperform their large-cap counterparts now because they have historically hedged inflationary pressure and delivered returns that are better than the broader market. Investors’ interest in micro-cap stocks is evident in the iShares Micro-Cap ETF’s (IWC) 4.4% returns over the past month, compared to the SPDR S&P 500 Trust ETF’s (SPY) 2.4% gains.
