After seeing paltry returns for most of 2014, advisors might wonder if it is time for U.S small-cap stocks to shine again. After all, if they compare the performance of the Russell 2000 with the S&P 500, small caps have a fairly long history of outperforming large caps.
But many strategists and analysts think small caps are a long way from reclaiming their role as market leaders. "Even with small caps lagging, the valuations in our view are still well above long-term averages," says Kate Warne, investment strategist at Edward Jones in St. Louis. "We are recommending investors reduce their holdings of small-cap stocks."
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