Morgan Stanley Predicts Small-Cap Stock Breakout in 2024, Challenging Mega-Cap Dominance
• Mega-cap tech stocks dominated the stock market in 2023, but Morgan Stanley predicts sharp outperformance from small-cap stocks in 2024
• Fed expected to cut interest rates in 2024, which historically hurts small caps but could benefit them this time with the economy still strong
• Lower rates should reduce small caps' cost of capital; they typically pay higher borrowing costs than large caps
• Morgan Stanley watching small-cap earnings revisions and small business confidence as indicators of whether outperformance will happen
• Goldman Sachs disagrees, expects mega-cap tech to keep outperforming in 2024