There are clear signs of a reversal rally after a meaningful correction last year for equities. The S&P 500 index has trended higher by over 15% for the first half of the year. With a decline in recession probability, the rally for the index is likely to sustain. There also seems to be clarity that rate hikes are nearing an end. Given the positive momentum, it’s a good time to increase the portfolio risk exposure and consider some small-cap stocks.
Of course, the focus should be entirely on fundamentally strong businesses supported by positive industry tailwinds. It’s not a good time to consider speculative exposure. That’s particularly true when fundamentally attractive small-cap stocks are poised for a meaningful rally in the next two to three years.
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