Asset management firm Alger points out that US mid-cap growth stocks may be experiencing a year-end seasonal rally. Data from the past 30 years shows that November and December are among the strongest performing periods for US stocks, with the Russell MidCap Growth Index averaging over 4.6% in those two months, higher than the S&P 500's average gain of 3.7% over the same period.
Alger believes this seasonality stems in part from investors focusing on next year's earnings prospects at the end of the year, prompting a reassessment of companies with strong fundamentals.
Regarding earnings expectations, according to analyst consensus forecasts as of October 15, the Russell MidCap Growth Index constituents are projected to see a 23% year-over-year increase in earnings per share in 2027, higher than the S&P 500's 16%.
Growth drivers include AI infrastructure, software companies benefiting from the widespread adoption of AI applications, and the life sciences industry. However, for most of 2026, mid-cap growth stocks are expected to underperform large-cap stocks, and the advantage of expected earnings growth has not yet been fully reflected in stock prices.
Alger believes that as market focus shifts to 2027 earnings and political uncertainty decreases after the US midterm elections in November, mid-cap growth stocks may benefit from both seasonal factors and earnings expectation gaps, and their relative performance is expected to improve in the coming months.
