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This trend continues today. Small-cap stocks were around 30% cheaper than large cap stocks as of the start of the final quarter of 2023, according to an analysis by BNP Paribas. This valuation gap is near a 25-year low, suggesting the potential for small-cap outperformance as market conditions shift, based on a report by Royce Investment Partners.

Perhaps that’s one reason stocks are selling off globally this morning. While most indexes in Asia and Europe remain near their all-time highs, there is broad-based but mild selling in all of them.