President Donald Trump’s pro-business initiatives should benefit U.S. small and mid cap stocks and, together with a potential re-normalization of interest rates, provide significant opportunities for active managers, Robert Lanphier and Dan Crowe, co-portfolio managers on William Blair’s Small-Mid Cap Growth and Mid Cap Growth strategies, said recently when speaking with Citywire and Investment Europe.
“There is no question [President Trump’s initiatives] would have a meaningful positive impact on the U.S. economy and the U.S. stock market,” Lanphier told Citywire, adding that small and mid caps should be disproportionate beneficiaries.
However, a policy might be “good for the economy, but not necessarily good for the companies,” Crowe told Investment Europe. “We are going to see companies have some expense pressures that they’ve not had for a decade.”
As new challenges arise, companies with differentiated products and services will be in a better position to adapt to the changing landscape.
In Lanphier’s interview with Citywire he notes that our goal, as an active manager focused on quality growth, is to determine which companies can sustain earnings growth regardless of whether the economy is growing or weakening.
“There is a need to see the ability to differentiate between high and low quality and high and low growth stocks in the market. That is difficult when free money seems to float all boats,” Lanphier told Investment Europe.
As the interest-rate environment starts to normalize, “you’re going to start to see more differentiation,” Lanphier told Citywire. “So I think there is still a place for active management.”