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Chart of the week

U.S. middle market shows notably strong top-line growth

Private middle market firms continue to power the U.S. economy, driving higher revenue growth than that of small and large cap firms.

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November 22, 2024 | 2 minute read

Trailing 12-month revenue growth

Column chart showing trailing 12-month revenue growth of constituents of the Russell 2000 Index (1.6%), the S&P 500 (6.2%) and the private U.S. middle market (12.9%). The strong revenue outperformance of private middle market firms speaks to the fundamental health of these companies relative to public small- and large-cap firms.

Source: Bloomberg Finance, L.P. Data for U.S. middle market as of June 30, 2024, latest data available. S&P 500 and Russell 2000 Constituent index data as of September 30, 2024. Russell 2000 Constituent index excludes financials and companies with less than $25 million EBITDA. The constituent population totals 792 companies.

  • The post-election bounce in stocks has cooled off somewhat over the past week, but the Trump trade remains firmly in place. For example, small cap stocks have notably outperformed the S&P 500 during November as investors believe these companies might disproportionately benefit in a second Trump administration.
  • Although small cap stocks have taken the lead, small cap companies remain fundamentally challenged. The quality of the firms in the Russell 2000 Index has deteriorated meaningfully over the past several decades relative to private middle market firms.
  • As the chart highlights, trailing 12-month revenue growth across all middle market companies has outstripped that of both the S&P 500 and Russell 2000 by approximately 7% and 10%, respectively, suggesting private middle market firms are driving notably higher growth than public small and large cap firms.1
  • Against this backdrop, the case for the growth and diversification potential that private U.S. middle markets may offer has rarely been more compelling as these firms continue to serve as a driving force of the domestic economy.

  • Bloomberg Finance, L.P. Data for U.S. middle market and S&P 500 as of 6/30/24. Russell 2000 Index excluding financials and companies with less than $25mm EBITDA. The constituent population totals 792 companies.

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.

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