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Chart of the week

U.S. middle market optimism outshines the world

This week’s chart examines the case for U.S. middle market firms, which expect a notably brighter future than their international peers.

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July 12, 2024 | 2 minute read

Percentage of mid-market firms expecting higher profits by country

Column chart showing the percentage of middle market firms by country that expect to generate higher profit growth over the next 12 months. U.S. middle market firms lead the way, with 70% of companies expecting higher profits compared a global average of 59%. Just 45% of firms in the European Union expect higher profits over the next 12 months compared to 56% of Asian Pacific firms, 58% of firms in the EMEA region and 63% of Latin American firms.

Source: Grant Thornton International Business Report, as of April 30, 2024, latest data available. EMEA refers to Europe, Middle East and Africa.

  • The U.S. middle market has emerged as an unsung hero for many investors, offering the potential for diversification and growth within a market that otherwise appears to present fewer opportunities for either, despite today’s ebullient backdrop.
  • Investing in the S&P 500, for example, increasingly implies a bet on a small group of large cap U.S. tech and tech-related firms—the Mag 7—as market breadth has narrowed significantly. Meanwhile, approximately 41% of small and mid-cap companies within in the Russell 2000 Index generate negative earnings today, up from 25% in 2012.1
  • According to Grant Thorton’s global survey of mid-market companies, U.S. businesses are more optimistic on the near-term outlook than their global peers. In fact, 70% of U.S. middle market firms expect to grow their profits over the next year compared to just 45% such firms in the European Union.2
  • Investors looking for reliable sources of growth and diversification face challenges due to recent fundamental changes in financial markets and the global economy. The private U.S. middle market may serve as a diversified source of growth within investors’ portfolios.

  • Bloomberg Finance L.P., as of July 31, 2024. Small and mid-cap stocks represented by the Russell 2000 Index.

  • Grant Thornton International Business Report, as of April 30, 2024, latest data available.

The chart of the week and any accompanying data is for informational purposes only and shall not be considered an investment recommendation or promotion of FS Investments or any FS Investments fund. The chart of the week is subject to change at any time based on market or other conditions, and FS Investments and FS Investment Solutions, LLC disclaim any responsibility to update such market commentary. The chart of the week should not be relied on as investment advice, and because investment decisions for the FS Investments funds are based on numerous factors, may not be relied on as an indication of the investment intent of any FS Investments fund. None of FS Investments, its funds, FS Investment Solutions, LLC or their respective affiliates can be held responsible for any direct or incidental loss incurred as a result of any reliance on the chart of the week or other opinions expressed therein. Any discussion of past performance should not be used as an indicator of future results.

This information is educational in nature and does not constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment. FS Investments is not adopting, making a recommendation for or endorsing any investment strategy or particular security. All views, opinions and positions expressed herein are that of the author and do not necessarily reflect the views, opinions or positions of FS Investments. All opinions are subject to change without notice, and you should always obtain current information and perform due diligence before participating in any investment. FS Investments does not provide legal or tax advice and the information herein should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact any investment result. FS Investments cannot guarantee that the information herein is accurate, complete, or timely. FS Investments makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.

Any projections, forecasts and estimates contained herein are based upon certain assumptions that the author considers reasonable. Projections are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results. The inclusion of projections herein should not be regarded as a representation or guarantee regarding the reliability, accuracy or completeness of the information contained herein, and neither FS Investments nor the author are under any obligation to update or keep current such information.

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