This is not a full post. Just a quick note that connects some of the other recent posts for a broader picture.
If we look at the late 1980s through early 2000s in the US, the small cap to mid-cap stocks did not do so poorly, often beating the larger stocks in price appreciation (tracked by an index like say the SP 500). This was an era of higher GDP growth and company growth potential. When growth is high, these nimble smaller sizes were favored as revenue growth was easier. This of course did come with a slightly higher risk or beta of the mid/small companies.
However, in recent times (past decade or two since late 2000s), the GDP growth rate has been muted and inflation has kept track at near-zero with low growth rates as expected. With near zero base interest rates, cheap capital access has not been an issue and large companies have become larger. Valuations have balooned under investors seeking better returns than low debt instrument returns (and pressuring management to further leverage with cheap corporate debt). Investors have also been bidding down the market rate of return to new lows by driving share prices up for the same corporate earnings as ever. And growth companies with any earnings growth or potential have traded at even higher multiples (see the valuation formula post).
I believe this macro climate is favorable to large companies and continue to be so for the forseeable future. After all, in an idealized case if Country X has zero GDP growth rate in a year, the total stock market revenue cannot increase that year by defintion. Any growth of a particular comany is accompanied by revenue reduction of another company, it becomes a zero-sum game. Given most growth (particularly as a percentage of existing size) happens to smaller nimbler companies and not to mature companies, they lose out the most in this enviroment.
Cars and Physics 