Chart of the week

The clear opportunity in a healthy middle market

Despite allocation challenges, revenue growth in the U.S. middle market remains healthier than ever as this week’s chart highlights.

February 9, 2024 | 3 minute read

Percent of middle market companies reporting positive annual revenue growth


Source: Macrobond, as of October 31, 2023. Latest data available

  • Historically high valuations for public U.S. large-cap equities (particularly within the Magnificent Seven, which represents a growing portion of the S&P 500), coupled with the paucity of compelling economic environments outside the U.S. leaves investors with an uncomfortable allocation challenge in 2024.
  • To address this challenge, investors may turn to the robust opportunity set in the U.S. middle market, including private middle market investments.
  • Comprised of more than 200,000 firms with revenues of $10 million to $1 billion, revenue growth among middle market companies has historically outpaced the S&P 500. In recent years, it has been much more stable than its large-cap peers as nearly all revenue (84%!) comes from within the U.S.1
  • Eighty-three percent of middle market firms reported positive year over year (y/y) revenue growth, representing the highest number on record.2 Despite the challenges from higher interest rates and slowdowns in select industries, fundamentals within the broader domestic middle market remain rock solid.
  • Against this backdrop, investors may be wise to allocate toward private middle market debt or equity investments if they seek to generate above-market income or growth potential.

  • National Center for the Middle Market, as of Q4 2023.

  • Macrobond, as of October 31, 2023. 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.

All investing is subject to risk, including the possible loss of the money you invest.

Search our site