The Set-up for Small & Mid Caps

Key takeaways:

Value leadership is broadening: Value stocks—especially small and mid caps—have significantly outperformed across market caps and continue to lead in down markets.
Market valuations remain elevated: Despite volatility, overall market multiples have re-expanded and remain above historical averages.
Expectations are high: Consensus forecasts call for above-average revenue and earnings growth, with margins already near historic highs—leaving little room for disappointment.
Mega-cap concentration is a risk: Market performance is heavily driven by a small group of large-cap stocks, with valuations and index weightings near historical peaks.
AI investment adds uncertainty: Rising capex is compressing free cash flow, with future returns dependent on growth and margin follow-through.
Growth remains expensive: High price-to-sales and valuation levels—especially in tech—suggest potential for underperformance.
Opportunity in small/mid caps: Valuation spreads are wide, investor positioning is light, and improving earnings create a setup for continued market broadening.

Bottom line: Elevated valuations, concentrated leadership, and high expectations increase risk in large-cap growth, while small- and mid-cap value stocks offer a more attractive, under-owned opportunity.

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Comments from MVP LIVE dated April 16, 2026.

This commentary reflects the views of the author as of the date above and is subject to change. There is no guarantee that any forecast, outlook, or opinion will be realized. This material is for informational purposes only and should not be considered investment advice or a recommendation to buy or sell any security. Statements containing ‘may,’ ‘could,’ ‘expect,’ ‘likely,’ or similar words are forward-looking and involve risks and uncertainties. Actual outcomes may differ materially. Information from third-party sources is believed to be reliable but is not guaranteed as to accuracy or completeness. References to specific investments are for illustrative purposes only and are not a recommendation to buy or sell any security. Portfolio holdings and positioning are subject to change. It should not be assumed that any investment in the securities referenced was or will be profitable.

Figures cited above should be verified against primary sources (e.g., Federal Reserve releases) and may reflect market estimates. Statements reflect our interpretation of public data; exact figures may vary by source and revisions.

The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. References to specific securities are for illustrative purposes only. Portfolio composition is shown as of a point in time and is subject to change without notice.

The views expressed in this commentary reflect those of the author as of the date of the commentary. Any views are subject to change at any time based on market or other conditions, and Miller Value Partners disclaims any responsibility to update such views. These views are not intended to be a forecast of future events, a guarantee of future results or investment advice. Adviser believes that the content provided by third parties and/or linked content is reasonably reliable and does not contain untrue statements of material fact, or misleading information. This content may be dated and may not have been independently audited by Miller Value Partners.

Earnings Growth is the annual compound annual growth rate of earnings from investments. Capital Expenditures (CAPEX) are payments made for goods or services that are recorded on a company’s balance sheet instead of expensed on the income statement.