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We're going to turn out to small caps. Despite some euphoria around smaller companies heading into 2025, the Russell 2000, as you can see that blue line there, dragging even lower than the S&P 500 year to date. Joining us with what's next for the small cap trade. We got Brian Bendek, who's the chief investment officer at MJP Wealth Advisors. Brian, great to have you. I was excited to talk with you because the last time you were on heading into the new year, you told me you were excited about small caps heading into 2025. What happened?

Uh what happened, I think is the uncertainty that we've seen from policy decisions perk up over the last couple of months and and the the change in sentiment on some of the soft data that came out about 30 days ago and it kind of persisted with investor sentiment that there might be a slowdown in the economy and and as you you both were talking about the revisions for US economic growth that has kind of trimmed back, I guess that investment thesis in the short term on on small cap stocks medicine.

So where are you on small caps today and the path forward for small caps for 2025?

Yeah, I mean, from a valuation point of view, uh we are still constructive or positive on small caps longer term. Um I think you you normally see smaller companies kind of take it on the chin in the short term or the first to recover as you're kind of coming out of concerns around economic growth. The fact that we're in this period of time of uncertainty as Paul said yesterday, I think 18 times in his 60 minute um uh meeting with reporters. Um you know, the the concerns about economic growth moving forward is is what's weighing on the sector. But I think when you look at overall price to earnings ratios and valuations for small caps and midcap stocks, there's still an opportunity here and a lot of the earnings growth forecast for profitable small cap companies are are still intact. So so definitely something to be cautious about in the short term, but if you're a longer term investor, I still think this is an opportunity when you think out uh you know, one to two years considering a slow growth economy.

Brian, I want to follow up on what you're ask what you're saying about valuations. What is the value story of small caps right now when you're looking at PE ratios or whatever value estimates. And with the rally we're seeing in Europe these days, are we seeing this desire among investors for value showing up not in small caps in the United States, but in value stocks outside of the United States.

Yes, it's a great question. I think on an overall basis, you know, because of the uncertainty and because of valuations being higher in mega cap tech, which as we know the last couple of years obviously have led the market higher and that concentration risk that existed in the market as we entered into 2025. That's why you're seeing a investment in any areas where value from a PE ratio is 18 or less. And so when you look at it from a US point of view, those the small cap stocks are trading around, you know, 14 on a on a PE handle while, you know, value stocks and a large cap space are around 18. And you look at at stocks outside of the US, they're in that 14 to 15 range and I think the reason why in the short term especially over the last 30 days international equities have have caught a bid is because of these potential policy decisions that are going to decouple the United States from that global uh uh inter relationship of of trade that these countries realize that they need to fill the room if if the US is taking a step back and reinvest domestically. And I think investors are seeing that as a potential longer term growth trend for non-US uh developed economies versus the US. However, I think it in this environment because so much is moving around and especially will continue to move around especially after April 2nd when we understand what does reciprocal tariffs really mean. I think this is the whole reason why one should stay diversified between areas that look for value opportunities, but at the same time, I would say don't give up on the the mega cap tech AI innovation trade just yet.