Small caps saw the most PE expansion since April ‘09
- In November, the forward PE for small caps hit a 20-month high, jumping nearly two multiple points to 18.4x from 16.6x as the Russell 2000 rallied 11%. This was the biggest monthly rise since April 2009 and more than double the multiple expansion of any other size segment during November. As a result, small caps now trade at a double digit premium to their historical median since 1985 across all of the five valuation metrics we track, led by PE to growth at a 60% premium. The current PE is 21% above its historical median of 15.2x since 1985, and near the cycle-high of 19.1x in 2014. Overall, valuations across size segments expanded in November as all size segments posted gains for the month.
- Small caps now trade above their historical premium to large. Based on forward PE, small caps went from trading in-line to large caps to trading at a 9% premium in November, higher than the historical 7% median premium since 1985 (for the first time since mid-2015) but well below the most recent 30% peak in 2011.