Small-cap stocks could finally outperform large-cap stocks in 2024, according to Goldman Sachs portfolio strategists. “Given current low valuations and a healthy economic outlook, the Russell 2000 small-cap index is expected to trade approximately 9% over the next six months and 12% over the next 12 months,” Goldman Sachs analyst Ben Snyder wrote in a Monday article. “You should get a 15% return on that.” Note. The 15% forecast is higher than Goldman's forecast for the large-cap S&P 500 to rise 7% by year-end (9% including dividends). Small-cap stocks significantly lagged large-cap stocks in 2023, with the Russell 2000 up about 15% and the S&P 500 up 24%. That's largely why large-cap stocks outperformed small-cap stocks last year. This is due to the meteoric rise of the so-called “Magnificent Seven” stocks, including artificial intelligence chip maker Nvidia and iPhone maker Apple. Snyder tied the optimistic outlook for small-cap stocks to Goldman's macroeconomic outlook for next year, which predicts 2% growth in U.S. gross domestic product. Historically, “nearly two-thirds of the variance in Russell 2000 12-month returns has been explained by valuations at the beginning of each period and real U.S. economic growth during that period,” Snyder added. Ta. Goldman argued that the Russell 2000's expected return of 15% this year is also in line with the index's historical median return of 16% during presidential campaigns dating back to 1984. Wall Street investment banks examined stocks that were currently trading below their median five-year price-to-earnings ratio and median five-year book-to-book ratio. Here are some of the stocks selected for the Goldman List. Broadcast and digital media company Tegna won Goldman Prize. Tegna, which owns 64 stations, is up just over 1% in 2024 so far after falling about 28% in 2023. Tegna's forward 12-month P/E ratio is 4 and trailing 12-month P/B multiples are both 1.0%. This is significantly lower than the results of the past five years. TGNA 1Y Mountain TEGNA is in stock. Last week, Tegna renewed its partnership with NBC, extending its agreement in 20 markets, covering about 17% of all U.S. households. Asset management firm WisdomTree also produced the Goldman screen. The stock is expected to remain largely unchanged in 2024 after rising 27% last year. WT 1Y Mountain Wisdom Tree Stock. North Coast Research upgraded the financial services stock from neutral to buy at the end of December, according to a report from StreetAccount. The company's price target of $9 per share suggests an upside of more than 31%. Other companies on Goldman's small-cap stock list include Ziff Davis and Array Technologies. —CNBC's Michael Bloom contributed reporting. Disclosure: Comcast owns NBCUniversal, which is the parent company of CNBC.
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