Large v small caps: Which came out on top in 2020?
In a year characterised by the COVID-19 pandemic and the US Presidential election, there was much volatility in stockmarkets but it was a clear win for smaller companies compared to larger companies in 2020.
According to FE Analytics data, the ASX Small Ordinaries returned 9.2% over the year to 31 December, compared to returns of 1.4% for both the ASX 200 and ASX 20 over the same period, which covered Australia’s largest companies.
Performance of ASX Small Ordinaries, ASX 20 and ASX 200 over one year to 31 December 2020
While the small index lost more than its rivals in the March market downturn, falling 40.4% to its bottom on 23 March compared to 35% losses for the ASX 200, it recovered strongly afterwards and gained 72%. The ASX 200 gained 47% over the same period.
The trend was even more pronounced in the second half of the year as Australia recovered from the pandemic and smaller companies, which were more sensitive to economic changes, returned to positivity.
It was not just in Australia that the large verses small-cap trend played out as in the United States, the Russell 2000 index returned 8.8% versus 7.2% by the S&P 500 while in the UK, the FTSE 100 lost 16% versus smaller losses of 10.2% by the mid and small-cap FTSE 250.
Performance of US and UK markets over the year to 31 December 2020
AUTHOR
Laura Dew
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