The general reduction of taxes and the imposition of import tariffs products manufactured abroad were two of the pillars on which Donald Trump’s electoral campaign was based to assault the Oval Office of the White House, and which now play the role of catalyst for American small and mid-caps to be the center of attention of investors and analysts.
These companies, along with banks, “led the advance after Donald Trump’s victory in the presidential elections,” the BlackRock Investment Institute explained this week in its market commentary. “In the short term, American equity markets, and in particular equities value and those of little And mid capswill get a boost with Trump’s victory,” said Brian O’Reilly, head of investment strategy at Mediolanum International Funds.
The expert also assures that within stocks, we would expect a market rotation, with a rebound in value (companies linked to raw materials, oil companies, banks, etc.) and securities. small cap (Russell 2000), as Trump’s policies are likely to be more favorable to traditional carbon energy sources and small businesses.
And, as Jesús Sánchez Quiñones, general director of Renta 4 Banco, SA, explains in one of his latest opinion articles on elEconomista.es, “the initial strong rise in the US stock markets reduces taxes, less than regulation in sectors and more business”. Indeed, the Russell 2000 index, which includes small and midsize companies, rose more than 5% on the first day after the election.
More precisely, the American selective sector has reassessed 5.8% on the first post-election day and since November 5, there have been increases close to one 7%making it the Wall Street index that has taken off the most since the elections, reaching reduce the gap suffered by these companies compared to their larger counterparts.
Historically, investors bet on these smaller stocks when they are confident in the direction of the stock market, because in bullish environments they tend to offer greater growth opportunities than large-cap giants.
Additionally, “history shows that small caps outperform large caps during periods of falling rates,” says Graham McCraw, senior equity investment specialist at abrdn.
In this sense, the manager assures that there are several factors that have led to the low medium-term profitability of small companies, but the rise in interest rates has been a key factor. However, falling inflation and slowing growth have allowed central banks to cut interest rates, which is identified as a catalyst for the profitability of small businesses, which are “closely linked to developments in economic activity.”
The one who took the longest trip to Wall Street
In fact, the Russell 2000 is the stock that Wall Street experts see the most potential for over the next twelve months. Even with the strong rebound in recent weeks, the stock index that tracks the performance of about 2,000 small-cap companies in the United States is expected to rise. rebound by more than 17% by 2025.
It is also the most cited index in Bank of America’s monthly survey of fund managers. Before the election, respondents were highlighting the Nasdaq as the stock index that would do best in 2025, but after the election, the Russell 2000 overtook it to the right and is positioned as the favorite for next year by 35 % of respondents. .
This confirms how leaders view Trump’s proposed economic policies, whether tax cuts or tax cuts.or high import tariffs, are seen as particularly positive for small and medium-sized American businesses.
Funds to follow the trend
In this sense, there are many funds for sale in Spain – and also in euros – that invest in small American companies to take advantage of the trend. Among them, the one which obtains the highest profitability this year (with data as of November 13, 2024) is the Heptagon Driehaus US Micro Cp Eq AE€Accthat Heptagon markets. It has four Morningstar stars and has appreciated by almost 40%. However, the minimum investment is high, 15,000 euros.
In this sense, with lower barriers to entry, GS US Sm Cp CORE Eq E Acc EUR Snap of Goldman Sachs, which reassesses more than 30% since the start of the yearthus beating the performance of the Russell 2000 and has two Morningstar stars.
And with a better rating of the platform (four stars) and almost the same profitability – around 30% – you will be able to find the Indosuez Funds America Small&Mid Caps PEof Crédit Agricole (see graph).
