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Wells Fargo says it’s time to bet on riskier small caps over the consensus mega cap trade

Pedestrians pass in front of a Skechers store in New York.

Scott Mlyn | CNBC

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After a springtime rebound trade dominated by mega-cap growth names, Wells Fargo now says it’s time to take a second look at small-cap stocks, which have been hit hard from the pandemic shutdowns in the U.S.

Equity strategist Christopher Harvey said in a note published Wednesday that he upgraded small-cap stock to an overweight rating given their multiyear underperformance, the favorable credit market outlook and a more optimistic macroeconomic outlook as more business reopen.

The Wells Fargo team highlighted a number of smaller names, including footwear company Skechers, they believe will outperform the broader market over the next 12 months. That’s likely to come as investors drift away from much-loved stay-at-home consumer tech giants like Amazon and Netflix that have led the S&P 500’s climb since late March.

Source: CNBC

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