Since the beginning of 2023, it's been hard to keep up with the pace set by the giants of the stock market (the magnificent 7), who set the pace for US financial markets and the other major world markets.

Yet, in the midst of this period of euphoria, and as early as last summer, small caps were showing exciting signs of improvement, showing better liquidity, favorable earnings trends and an attractive entry point. In line with their history, they should also have benefited from the upward movement.

Drum roll. It didn't go as planned. In the USA, they were literally crushed by the tech giants, which captured investors' attention. Since the beginning of 2023, the Russell 2000 has gained just 14%, while the Nasdaq has risen by nearly 64%.

The difference is just as glaring since the start of the year, with the queen of the US indices gaining over 8%, while the Small caps index has remained at equilibrium.

In Europe, small caps failed to buck the US trend. In Germany, the SDAX has gained 14% since January 2023 and fallen by almost 2% since the beginning of 2024. The main index, the Dax, has risen by 25% since last year, and 4% since January 1.

In France, the weakness of small caps is even more striking. The Cac 40 has gained over 20% since January 2023 and 5% this year, while the Cac small has dropped 3% since 2023, and is hovering at equilibrium this year.

On both sides of the Atlantic, small caps continue to suffer from persistently high interest rates (due to their higher debt levels) and an uncertain economic environment (due to their sensitivity to cycles). As they are less exposed to the sectors that have led the recent upswings (technology, luxury goods, banks, commodities), they have also missed out on the recent rallies. While 2024 promises, according to many managers, to be marked by a rebound in small caps, it seems that we'll have to be patient to see this prophecy come true.