U.S. middle market optimism outshines the world.

This week’s chart examines the case for U.S. middle market firms, which expect a notably brighter future than their international peers.

Percentage of mid-market firms expecting higher profits by country

• The U.S. middle market has emerged as an unsung hero for many investors, offering the potential for diversification and growth within a market that otherwise appears to present fewer opportunities for either, despite today’s ebullient backdrop.
• Investing in the S&P 500, for example, increasingly implies a bet on a small group of large cap U.S. tech and tech-related firms—the Mag 7—as market breadth has narrowed significantly. Meanwhile, approximately 41% of small and mid-cap companies within in the Russell 2000 Index generate negative earnings today, up from 25% in 2012.[1]
• According to Grant Thorton’s global survey of mid-market companies, U.S. businesses are more optimistic on the near-term outlook than their global peers. In fact, 70% of U.S. middle market firms expect to grow their profits over the next year compared to just 45% such firms in the European Union.[2]
• Investors looking for reliable sources of growth and diversification face challenges due to recent fundamental changes in financial markets and the global economy. The private U.S. middle market may serve as a diversified source of growth within investors’ portfolios.

Catch up on chart of the week.

[1] Bloomberg Finance L.P., as of July 31, 2024. Small- and mid-cap stocks represented by the Russell 2000 Index.

[2] Grant Thornton International Business Report, as of April 30, 2024, latest data available.

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