Year to date, large capitalization companies have outperformed small-cap companies as investors fled to safety during the market downturn and the rebound. Most small-cap companies are more domestically focused and are not as geographically diversified as the large-cap companies. Given the significant global equity rally since the late March market low, the Fund remains well positioned with a dividend yield of 4.4%, as of June 30th.
We believe the majority of dividend suspensions and cuts put in place by small-cap companies are now behind us. The Fund remains underweight cyclical stocks (gold/silver/energy/industrials). With the Canadian economy slowly reopening in phases and activity starting to increase, we expect that small-cap company stock performance should begin catching up to the large companies over the next 6-18 months. We expect equity markets to continue their upward trend over the next 12-18 months. However, we would not be surprised to see a market pullback over the next few months as headlines regarding the surge in new COVID-19 cases continue, and U.S. political uncertainty persists. Any pullback should be viewed as a buying opportunity for long-term small-cap investors.