Although it's common to think small-cap stocks suffer most during recessions, the data tells a more nuanced story. Analysis of developed markets shows that in 64% of years when GDP declined, small caps actually outperformed large caps—a rate even higher than their typical performance advantage. 

This finding challenges the belief that economic slowdowns always disadvantage smaller firms. One reason may be that financial markets are inherently forward-looking, often pricing in future recovery well before it's visible in economic data. 

As a result, the size premium—where small caps outperform—can still emerge during downturns. Ultimately, small-cap strength isn't strictly tied to GDP trends, underscoring the importance of long-term diversification over short-term predictions.

Finsum: This is much different than the interest rate driven volatility several years ago, this could be a great time to capitalize