Testing times

The recent background for small cap investors in the UK has been a testing one. At the same time that the tech-induced euphoria at the start of the year was shifting to short-term concerns based around sustainability of valuations, so the general macro environment for small companies was deteriorating. In the past few months, domestic growth forecasts have been reduced for next year and the legacy of a strong currency and continued downward pricing pressure in both retail and manufacturing have led to a decline in earnings expectations. Across a wide range of companies profit downgrade...