U.S. Small Cap Companies are Primary Driver of Wealth Creation

Jan 4, 2024 | Macro Insights, No Bull Economics

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This is a great graphic that shows the performance of key asset classes over the last 100 years or so. From 1926 – 2022, $1 has inflated to $17 while a $1 investment in U.S. small caps has grown to $28,668 according to data from Dimensional Fund Advisors.   

Commentary

  • While large caps receive all the limelight, small businesses represent the primary growth engine of the U.S. economy. Not only do small businesses employ the bulk of the population, but they also represent the primary driver of wealth creation. Notably, large caps all started as small businesses.
  • If investors can stomach a regular course of stock market crashes & are able to hold on for 100 years, they could become quite rich by betting on the innovation, drive & skill of U.S. entrepreneurs as outlined in the chart below.
  • We would all do well to remember the U.S.A.’s “concept essence”: we are an enterprising people that, for the most part, succeed & prosper by serving others with helpful services & goods.
  • Needless to say, but past performance is no guarantee of future results…   

$1 Index from 1926 - 2022

Source: Dimensional Fund Advisors

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