Again, connoting the income disparity between the rich and middle class, big and small, companies listed on the Russell 2000 of small-cap publicly-traded companies collectively lost $1.1 billion in 2020’s second quarter, compared to $18 billion in profits a year earlier, reported FactSet, a data company.
Goodyear Tire & Rubber lost $696 million in the quarter, for example, as sales shrank by 41 percent, compared to a profit of $54 million a year earlier.
Larger companies listed on the S&P 500 index suffered a 34-percent setback in profits but still posted $233 billion in earnings.
The Russell 2000 is 5.6 percent below its’ 1 January mark, while the S&P is up 3.2 percent on the year, despite shedding 30 percent of its value in March.
Big companies have the financial “strength to ride out whatever is thrown at them,” said Margie Patel, a portfolio manager at Wells Fargo Asset Management.
In comparison, small companies lack the strong balance sheets and higher profit margins that buffer them against sudden shocks.
“Small-cap companies don’t have the flexibility” to reduce costs, “especially when there’s no revenue coming in,” noted Liz Young, market strategist at BNY Mellon Investment Management. “They are the companies that will need help in this crisis.”
