Equities Equity Essentials: Ideas and insights in under three minutes

First, broadening leadership and rotation

After years of megacap tech dominating market performance, leadership is finally beginning to broaden. The Russell Mid Cap Index outperformed the Russell 1000 Index by nearly 500 basis points year to date. It’s a meaningful shift and one that could bode well for mid-caps. We’re seeing stronger performance across many mid-cap names. Also, it appears that investors are again focusing on higher-quality companies, which could favor mid-caps. They tend to be more well-established companies. This recent rotation opened the door for us to lean into mid-sized technology companies that are participating in the build-out of AI infrastructure.

Second, attractive valuations and earnings growth

Mid-caps have been trading at attractive valuations relative to large-caps. They recently traded at a 15% discount versus large-caps based on the forward P/E ratio. Also, many analysts expect stronger earnings growth from small- and mid-caps than from their large-cap counterparts. Against this opportunity, our investment team is focusing on companies within the materials sector — particularly metals and mining — as well as select industrials, including businesses tied to transportation.

Three, lower interest rates.

Rate-sensitive small and mid-sized companies benefited from lower borrowing costs due to the three interest rate cuts in 2025. We see this as a potential tailwind for mid-caps.

The cuts also enabled us to lean into financial services companies that may stand to benefit from lower rates, particularly regional banks.

Taken together, we believe the Invesco Value Opportunities Fund is well-positioned. Plus, we have an experienced team with a long-term investment mindset, a bottom-up, fundamentally driven portfolio, and deep expertise across the value spectrum. With more than $50 billion in value assets across small-, mid, and large-caps, Invesco knows value.