Small-cap stocks could finally break out above their large-cap peers in 2024, according to Goldman Sachs portfolio strategists. "The combination of low current valuations and a healthy economic outlook indicates that the Russell 2000 small-cap index should return roughly 9% in the next 6 months and 15% in the next 12 months," Goldman Sachs analyst Ben Snider wrote in a Monday note. That 15% forecast tops the 7% expected gain for the large-cap S & P 500 that Goldman sees by the end of the year, or 9% when including dividends. Small caps lagged large caps by a wide margin in 2023, with the Russell 2000 climbing about 15% compared to a 24% gain for the S & P 500. The outperformance of large caps last year compared to their small-cap cousins was largely due to the meteoric rise of the so-called " Magnificent Seven " stocks, including artificial intelligence chipmaker Nvidia and iPhone maker Apple . Snider ties the optimistic outlook for small-cap stocks to Goldman's macroeconomic outlook for the coming year, which anticipates 2% growth in U.S. gross domestic product. Historically, "nearly two thirds of the variation in Russell 2000 12-month returns has been explained by valuations at the start of each period and real U.S. economic growth during the period," Snider added. The forecast 15% return for the Russell 2000 this year also matches the index's historical median return of 16% during presidential election years going back to 1984, Goldman argued. The Wall Street investment bank screened for stocks that are currently trading below their five-year median price to earnings multiple, and five-year median price to book multiple. Here's a look at some of the stocks that made the Goldman list. Broadcast and digital media company Tegna made Goldman's cut. The owner of 64 stations is ahead a little more than 1% so far in 2024 after plunging almost 28% in 2023. Tegna's forward 12-month P/E ratio of 4 and trailing 12-month P/B multiple of 1.0% are both far below the past five years' track record. TGNA 1Y mountain TEGNA stock. Tegna last week renewed its affiliate agreement with NBC , extending an agreement in 20 markets covering about 17% of total U.S. households. Asset manager WisdomTree also made Goldman's screen. Shares are virtually unchanged in 2024 after rallying 27% last year. WT 1Y mountain Wisdom Tree stock. Northcoast Research upgraded the financial services stock to buy from neutral at the end of December, according to a StreetAccount report. The firm's $9 per share price target implied more than 31% upside ahead. Other names that made the Goldman small-caps list include Ziff Davis and Array Technologies . — CNBC's Michael Bloom contributed reporting. Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
