Our many years spent managing small cap portfolios for clients around the world has taught us that experience is a good friend to have, particularly during difficult markets.

We’ve seen three bear markets in the US during the twenty-first century (the bursting of the dot-com bubble in 2000–02, the global financial crisis in 2007–09 and the Covid-19 outbreak in 2020) as well as countless mini-crises in between. The current stock pullback—“pullback” may turn out to be an understatement, but at this stage we’ll withhold judgment on the most appropriate descriptor—is marked by characteristics both similar and unique relative to previous incidents. This time around, the usual suspects of richly priced markets, highly leveraged companies and complacent investors have been joined by multi-decade-high levels of inflation spawned by a global pandemic that snarled supply chains and prompted extreme measures of fiscal and monetary accommodation. As an old colleague of ours would quip, “Same church, different pew.”