We are upgrading Japan to overweight as our concerns about a stronger yen abate and while we continue to be positive about corporate reforms and the end of deflation in Japan . We maintain our recommended overweight exposures to Europe and China. On the style front, we reaffirm our preference for value over growth, and small caps over large caps in the U.S.
Past performance is not indicative of future results.
Source: Neuberger Berman and FactSet, data as of June 30, 2025. Nothing herein constitutes a prediction or projection of future events or future market behavior. Due to a variety of factors, actual events or market behavior may differ significantly from any views expressed. Investing entails risks, including possible loss of principal. For illustrative purposes only. The Russell 1000 is a US stock index that represents the 1,000 largest companies by market capitalization within the American stock market. It includes both large and medium-sized companies and covers about 90% of the total market capitalization of publicly traded companies in the United States. The index is often used as a benchmark to assess the performance of US large-cap companies. Volatility is measured by standard deviation, while risk-adjusted return is measured by the Sharpe ratio.
The Quiet Comeback of Value and Small-Cap Stocks
Amid the noise of headline indices and the relentless spotlight on mega-cap growth names, a powerful story has quietly unfolded beneath the surface: value and small-cap stocks are staging a comeback that many investors may have missed.
- While much of the market’s attention has remained fixed on a handful of high-profile names, the low beta segments of the market—particularly value-oriented and smaller companies—have delivered superior returns with less volatility. This shift reflects a changing macro environment: as economic growth moderates and policy uncertainty rises, investors are seeking resilience and consistency, turning to stocks that combine attractive valuations with robust fundamentals.
- Over recent months, value stocks have quietly outpaced growth, benefiting from renewed industrial activity, supportive policy dynamics, and a global pivot toward quality and income. Small-cap stocks, often overlooked in broader market narratives, have shown impressive strength as earnings momentum accelerates and their sensitivity to economic cycles becomes an asset rather than a risk.
- This quiet resurgence is more than a short-term trend. It signals a broader recognition that the next phase of equity leadership may come from less crowded corners of the market. Thematic opportunities—such as digital transformation and secular industrial renewal—are emerging well beyond the traditional “defensive” or mega-cap sectors.
- For investors, the takeaway is clear: broadening your perspective to include value and small-cap exposures is not just about diversification—it’s about tapping into evolving sources of market leadership that have been hiding in plain sight. By embracing these overlooked opportunities, investors can position portfolios for greater resilience and long-term growth as the equity cycle advances.
- We continue to focus on uncovering these underappreciated trends and targeting both established leaders and new innovators, ensuring our approach is as dynamic and adaptive as the market itself.
Global Equities: The Rise of New Market Leaders
While headlines remain focused on the familiar giants of the US market, savvy investors are starting to notice the rotation happening in real time.
- Value stocks and smaller companies have delivered superior risk-adjusted returns, benefiting from more attractive valuations, a rebound in industrial activity, and renewed investor appetite for resilience and income.
- In Asia, China’s “Magnificent 7”—a cohort of homegrown tech and consumer champions—are now outperforming many Western peers, showcasing the dynamism and depth of opportunity beyond the US.
- Small-cap stocks, often overshadowed by their large-cap counterparts, have quietly rebounded as earnings momentum accelerates and their cyclical sensitivity becomes a tailwind in the current environment.
- At the same time, value-oriented equities are benefiting from supportive policy backdrops and investors’ desire for stability amidst macro uncertainty.
- It’s a pivotal moment for global investors: The next phase of equity leadership is unlikely to be found in the same places as the last. Instead, it will come from a broader, more diverse set of opportunities—across regions, sectors, and styles.
- For those willing to look past the headlines, the message is clear: a truly global approach is now essential to capture the full breadth of today’s equity opportunities.
- By embracing value, small-cap, and non-US market leaders like China’s Magnificent 7, investors can diversify their sources of return and position for long-term success as the equity cycle evolves.
- Our focus remains on uncovering these underappreciated trends and targeting both established and emerging innovators—wherever they are found—to ensure portfolios are positioned for the new era of global equity leadership.
