The election of Donald Trump as President of the United States brings a range of uncertainties. Only once more clarity emerges about the course that will be taken on key issues will the full impact of this election result on the U.S. economy, international trade, and geopolitical tensions become clear. However, this did not prevent investors in U.S. small-cap stocks from taking a speculative advance on favourable scenarios for them.
After a four-year hiatus, Trump is poised to return as the 47th President of the United States. However, his election also introduces a series of uncertainties that could impact financial markets in the coming years.
Market volatility will partly depend on the extent to which Trump actually follows through on his campaign promises. This is particularly true given Trump’s previous tendency to express his positions via social media, sometimes contradicting prior announcements, making his unpredictability a potential factor that could spark market volatility unexpectedly.
Nevertheless, his re-election has already provided a significant boost to the U.S. stock markets, with small-cap stocks seeing a particularly notable surge. Trump’s promises of tax cuts, import tariffs, and deregulation have fuelled optimism among U.S. investors, particularly in sectors that are heavily reliant on domestic policy. The Morningstar US Small Core Index, a benchmark for small-cap stocks, rose by over 3 percent, while U.S. small-cap value stocks saw an increase of more than 5 percent.
Small-cap companies, which are often primarily active in the U.S. market, are more sensitive to domestic policy and less dependent on international markets. Trump’s emphasis on protectionist measures and strengthening U.S. industry could particularly benefit these companies. Furthermore, Trump’s trade policy is a key pillar of his economic vision. His intention to raise import tariffs, including a universal 10 percent tariff and rates up to 60 percent on Chinese products, creates expectations that U.S. producers will be favoured.
Despite the enthusiasm for U.S. small caps, investors must remain vigilant regarding the political dynamics. Trump’s victory does not guarantee that all his plans will be implemented without opposition, and the upcoming 2027 midterm elections could alter the balance of power in Congress.
Elections, especially those as highly charged as this one, can lead to additional market fluctuations in the short term. However, history shows that it is wise to be cautious about making major adjustments based on political events. Market swings are often driven by speculation, without underlying fundamental changes. It is important to realise that the greatest risk in such events often lies not in the events themselves, but in the hasty decisions we may make in response to them.
Janus Henderson US Venture Fund The strategies that stand out on Morningstar’s radar have, in the qualitative judgement of fund analysts, a solid management team and a sound investment process or are credited with these qualities based on an algorithm that assesses investment funds using the same framework as the fund analysts. In this edition, we highlight a fund that meets these criteria within the Morningstar US Small Cap Equity category.
According to Morningstar’s fund analysts, Janus Henderson US Venture Fund is a solid choice for gaining exposure to U.S. small-cap growth stocks. It earns an Above Average rating for both People and Process, resulting in a Bronze Morningstar Medalist Rating for its I2 USD share class.
This small-cap strategy benefits from stable and experienced managers, particularly Jonathan Coleman, who has focused on small- and mid-cap stocks for most of his career. He joined Janus in 1994 and achieved success with most of the funds he managed before taking the lead on this strategy in 2013.
Co-manager Scott Stutzman was an analyst for the fund for nearly a decade before transitioning to his current role in 2016. In late 2022, the management team was further strengthened with the return of Aaron Schaechterle to Janus, who joined the strategy as a co-manager. Six dedicated small- and mid-cap analysts round out the team, providing robust support.
The team’s moderate approach to growth investing has many appealing attributes. The focus is on small-cap companies capable of growth throughout economic cycles. The managers target reasonably priced stocks, not necessarily the cheapest, and maintain a long-term perspective. They anchor the portfolio in stocks they believe carry the lowest downside risk, typically those with stable profit and revenue streams. Companies with more variable outcomes, such as biotechnology, are generally given smaller positions.
The fund’s performance stands out for its attractive and consistent returns. Under Coleman’s leadership, the investment fund held up relatively well during nearly all major market downturns, such as in 2015, 2018, and 2022 – the only calendar years when the Russell 2000 Growth Index posted a loss. During this period, the strategy captured only 86 percent of the benchmark’s monthly losses. Conversely, the moderate approach tends to lag during rallies, as seen in 2023.
Jeffrey Schumacher is Director of Manager Research at Morningstar Benelux. Morningstar analyses and assesses investment funds based on quantitative and qualitative research. Morningstar is part of the expert panel of Investment Officer.