The decline of mid-caps and small caps during the pandemic can be attributed to several factors. Firstly, the pandemic led to a surge in e-commerce, benefiting large companies and leading to a recovery in the U.S. stock market. However, medium and smaller companies, which may not have been able to adapt as quickly, suffered. Secondly, a significant portion of the stimulus capital that entered U.S. capital markets was directed towards innovative firms, leaving less for mid-cap and small-cap companies. Lastly, market consolidation around innovators or market giants with solid balance sheets, high-value assets, cheap debt, and low fixed costs also contributed to the decline.
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