Ariel Investments Small/Mid Cap Value Q4 2024 Commentary

2025-02-21 23:19:00 ET

Summary

• Markets worldwide defied expectations in 2024 led by the dominating performance of mega-cap technology stocks known as the “magnificent seven.
• Ariel Small/Mid Cap Value Composite advanced +0.76% gross of fees (+0.65% net of fees) in the quarter, ahead of the Russell 2500 Value Index and Russell 2500 Index, which returned -0.26% and +0.62%, respectively.
• We did not initiate or exit any positions in the quarter.

Markets worldwide defied expectations in 2024 led by the dominating performance of mega-cap technology stocks known as the “magnificent seven. ¹ ” Even though gains have been concentrated, the results of the U.S. election, strong earnings momentum and a robust labor market drove bullish sentiment. This ebullience extended beyond the equity market: gold delivered its best year since 2010, bitcoin more than doubled and the U.S. dollar neared a 20-year high. Meanwhile, uncertainty surrounding the new U.S. administration’s policies and the Federal Reserve signaling slower than anticipated easing in the year ahead drove small cap issues sharply lower in December. Although uncertainty and volatility are likely to remain elevated, the patient investor knows “stock prices trade on fundamentals. And when those solid fundamentals shine through, share prices rise. ² ” Against this backdrop, the Ariel Small/Mid Cap Value Composite advanced +0.76% gross of fees (+0.65% net of fees) in the quarter, ahead of both the Russell 2500 Value Index and Russell 2500 Index, which returned -0.26% and +0.62%, respectively. Over the trailing one-year period, the Ariel Small/Mid Cap Value Composite increased +14.86% (+14.34% net of fees), significantly ahead of both the Russell 2500 Value Index and the Russell 2500 Index, which gained +10.98% and +12.00%, respectively. ...

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