UK small cap stocks weathering the storm

Key takeaways:

• Small-cap growth stocks have struggled to begin the year amid concerns that higher interest rates to curb inflation will weigh on global growth. Unexpectedly weak data and recurring lockdowns in China have also served as a headwind.
• Despite rising labour, energy, and raw material costs – small cap stocks, overall, have been quite resilient as companies with strong pricing power have been able to pass on costs to consumers.
• The outlook remains uncertain given that macro-headwinds remain in play. However, the microenvironment is encouraging – companies have solid cashflows and balance sheets, are successfully dealing with rising costs and dividends are recovering.