Chapter 10. Location, Location, Location?

I have already unveiled my view that regulatory increases and changing tax laws tend to tilt the economic environment in favor of small-cap stocks, as smaller companies are more nimble and thus can react much more quickly to economic changes. In financial parlance, smaller-caps exhibit a lot more “elasticity” than larger-caps—or, put another way, these companies have a greater ability to substitute. Nevertheless, as economic time goes by and scheduled tax and regulatory changes take effect, the need to be nimble to take advantage of these changes disappears. Hence, over the longer term, my analysis points to a market where larger-caps dominate. Again, the rationale is straightforward: As uncertainty regarding ...

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