New York - You should consider buying Small Cap stocks during during the following economic cycles:
Cycles of fast economic growth
Cycles where the threat of inflation is moderate.
There is no market instability or uncertainty.
These economic cycles have historically led to an increase in inflation that, in turn, leads to an eventual slowdown in the economy. Some analysts believe that Small Caps do best when the economy is strong. Rapid growth creates new market opportunities that small companies can exploit. Larger companies generally lose their reluctance to deal with small companies and lending companies relax credit standings. Moderate inflation provides an opportunity for small firms to charge premium prices to their products and plow back earnings into growth.
Small Cap stocks are extremely volatile; therefore, you need to ensure that they are appropriate given your investment strategies and risk tolerance levels.
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