Small- and mid-cap stocks (SMID), despite bursts of outperformance, have underperformed large-caps year to date - as they have over the past five years. But they may be in a better position to generate market-beating returns going forward. SMID companies tend to focus on domestic markets, so their businesses could be less disrupted by the fallout from unrest in the Middle East, the Russian invasion of Ukraine, issues in China, or other geopolitical developments. As well, the prices of SMID stocks generally are lower than the prices of large-caps. SMID stocks can be risky, but despite those risks, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 20% of the U.S. stock market's capitalization is comprised of SMID stocks.

Ethan Allen Interiors Inc., based in Danbury, Connecticut, is a manufacturer and retailer of home furnishings. FY24 sales were $646 million. The company sells its products through a network of approximately 300 retail design centers. Products include beds, tables and other case goods, upholstered items such as sofas and recliners, and accessories such as clocks, window coverings and rugs. The company manufactures about 70% of its products in North America.

Stocks are widely lower, continuing yesterday's slide and on the back of this morning's surprise Jobs report. The Unemployment Rate ticked up to 4.3% for July from 4.1% the month before. Nonfarm Payrolls printed at 114,000, much lower than the expected and the month before. These weak labor numbers raise questions: Did the Fed wait too long before pivoting to easing monetary policy? Will they enact a larger cut in September, perhaps 50 bps instead of the expected 25 bps? Is the desired soft landing still possible? We note that the recent GDP report gives us confidence that the U.S. economy has avoided a recession. And more data keeps coming. Deep breathes. Every day we recalibrate.

Ethan Allen Interiors Inc., based in Danbury, Connecticut, is a manufacturer and retailer of home furnishings. FY23 sales were $791 million. The company sells its products through a network of approximately 300 retail design centers. Products include beds, tables and other case goods, upholstered items such as sofas and recliners, and accessories such as clocks, window coverings and rugs. The company manufactures about 75% of its products in North America.