Richard Larner, head of offshore research, Brooks Macdonald Asset Management
Although the FTSE SmallCap index has outperformed the FTSE 100 in the past 12 months, we still feel the outlook remains supportive. With domestic economic conditions improving, their high beta characteristics imply greater sensitivity to improving fundamentals. However, being selective and focusing on quality is crucial to benefit from the next stage of the market rally. In addition to the momentum of the recovery now taking hold, we would expect bank lending conditions specifically for smaller companies to improve over time, enabling management of these businesses to increase capital expenditure and position themselves for future growth.
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