Aristotle Small/Mid Cap Equity Q4 2024 Commentary

2025-01-21 05:20:00 ET

Summary

• SMID caps posted mild gains in the fourth quarter with the Russell 2500 index delivering a total return of 0.62%, bringing its year-to-date total return to 11.99%.
• For the fourth quarter, the Aristotle Small/Mid Cap Equity Composite generated a total return of -0.45% net of fees, underperforming the 0.62% total return of the Russell 2500 Index.
• We remain optimistic about the long-term potential for the SMID-cap segment of the U.S. market.

Markets Review

The volatility observed throughout 2024, continued into the fourth quarter. SMID caps posted mild gains in the fourth quarter with the Russell 2500 index delivering a total return of 0.62%, bringing its year-to-date total return to 11.99%. After a sluggish start to the quarter, November was a standout month for SMID cap stocks following the U.S. elections, as the Russell 2500 Index rallied 9.84% driven by expectations of pro-business policies under the incoming Trump administration. However, these gains were largely erased in December, as the Index declined -7.54%, reflecting renewed concerns over geopolitical tensions and uncertainty around the incoming administration's policies, such as tariffs and immigration, as well as the impact of sharply higher U.S. yields. Furthermore, continued strong economic growth, a stable labor market and firmer inflation data all pushed the Federal Reserve (Fed) in a more hawkish direction in December. After consecutive 25 basis point rate cuts at the November and December meetings, Chairman Powell indicated the Fed is likely to take a more measured approach going forward and the committee updated their projections to forecast only two rate cuts in 2025....

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