Rising Rates and Trade Wars in the Small Cap Value World

By Jeff John - November 5, 2018

There are a couple of topics that much of the investing world is fixated on right now, and for good reason: the multi-pronged trade war, and rising U.S. interest rates. Both of these hot-button issues affect the investing world I inhabit: small cap value. And when it comes to higher rates, it turns out that they cut both ways.

For example, rising rates are a good thing for the local and regional banks that we like in our portfolio. But for small companies that have floating rate debt, those increasing rates will mean higher payments on loans they owe.

The other big topic, trade wars, was one we initially thought wouldn’t do damage to the companies in our portfolio. But as we dug deeper, we determined that tariffs would, in fact, hurt the bottom line—even for companies that don’t rely on exports. Click on the video below to find out what we uncovered.

Jeff John
Jeff John
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    Rising Rates and Trade Wars in the Small Cap Value World

    There are two topics that much of the investing world is fixated on right now: the multi-pronged trade war and rising U.S. interest rates. In a new blog post, Vice President & Sr. Small Cap Value Portfolio Manager Jeff John shares what it means to his slice of the market.

      Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

      Generally, as interest rates rise, the value of the securities held in the fund will decline. The opposite is true when interest rates decline.

      Historically, small- and/or mid-cap stocks have been more volatile than the stock of larger, more-established companies. Smaller companies may have limited resources, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies.

      The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.