Feb 08, 2026
3 min read
US and European "small-cap" indexes hit record highs earlier in the year, beating large-cap companies
The last small values confirm the good signs
Yu
It's time.Small stocks take center stage in 2026 after a long period of waiting in the shadow of large companies.The first steps have been taken since the beginning of the year: the US Russell 2000 index has reached an all-time high and is ahead of the S&P 500 with a return of 7.5% per year, compared to the flat balance of the global benchmark index.Europe follows the same trend: MSCI Europe Small Caps is up 4% in 2026, also reaching the benchmarks, and the MDax rose by more than 3%, compared to 0.7% for the German Dax.
What is driving this momentum?Bank of America explores several reasons.The first relates to profitability: market consensus expects EPS growth of 18% for US small caps in 2026, compared to 16% for mid-caps and 13% for large-caps.Also, the Federal Reserve is expected to continue lowering rates, which will "help reduce refinancing risks", and the fact that these small companies sell to "corporations".According to Bank of America, the factors have been added the reform of tariff policy - "with possible exemptions", more positive for small caps because "they have lower margins"-;Less regulatory burden, and more favorable assessment.In fact, discounting of small values compared to large values has reached unprecedented levels.
For XTB, one of the most surprising aspects of the Russell 2000's performance is that all sectors have recorded progress."The artificial intelligence bubble is cooling without bursting, and although the technological leadership may return, in the short term the exposure is more circular and more defensive; we will see a change to banks, pharmaceutical companies and small companies," the company emphasizes.
Aberdeen Investments says the history of U.S. small companies is "one of contradictions, characterized by a delicate balance between risk and opportunity, investor skepticism and determination."The Scottish manager sees current performance prospects as a compelling case for investing in them.For example, Kirsty Desson, Director of Global Small Caps at Aberdeen Investments says: "Industrial bonds have the quality attributes we look for, such as extensive technical expertise, strong business relationships and strong pricing power, which in turn provides a high and sustainable return on capital. In addition, they serve a variety of end markets, which means they are increasing in the industrial sector over the infrastructure sector and benefit from one driver."protection, as well as building data centers and increasing interest in automation.
From the region, Kirsty Desson added, "Until 2026, the money will gradually move away from the main projects in the US budget to generate income elsewhere. In terms of valuation, it shows REV Group, which sells emergency vehicles (fire engines, ambulances and other public safety products) in the USA. Providing quality and personalized solutions with exceptional customer service, "Desson added.
In Europe, the manager relies on a diploma - "a global distributor of industrial components, low cost but essential for end applications, with products that are always in demand" -;Box game company Games Workshop - "with a unique model of vertical integration, exceptional brand loyalty and consistently high financial performance" - and Swedish technology group Addtech, "with solid growth potential and a long track record supported by organic expansion and strategic acquisitions".
Mirabaud is primarily focusing its attention on Europe because it is "where valuation support and profit recovery meet most clearly."It is clear that European equities are trading at 13.4 times earnings, while US earnings are 19.7 times.The Swiss bank emphasizes that "many companies have faced difficult years (from supply shortages and rising inflation to tax disruptions and currency devaluations). ups and downs) and emerged stronger from them."
Hyvel Franklin, director of European equities at Mirabaud, recently said that Italy, Norway and Germany are the most attractive countries to invest in. There are many opportunities in the financial and consumer sectors. In his opinion, the best options are in sectors that are undervalued, under-exploited and, in particular, at the smallest end of the market, less than 2 billion capitalization.
On the corporate side, it favors Credito Emiliano, an Italian bank that focuses on asset management and has been gaining market share over time;German Norma is from the automotive and industrial sector, and despite doubts that the sector is excited among investors and Swedish AcadeMedia, according to Mirabaud, "a business that generates a lot of visibility" dedicated to pre-school, primary, secondary and higher education.
The expected moment
Santander Small Caps fund manager Lola Solana expects "the gap between small and large companies in Europe and the US will narrow this year; after a strong rally by large technology and financial companies over the past three years, the discount has reached historic highs."As this veteran SME expert explains, smaller companies have a "more cyclical and industrial component."
As recent sectors, Solana points to the power of artificial intelligence and data centers due to the growth in demand – which has remained constant for 20 years.Generally, the manager expects more investment in the industry after activities focused on tourism and services and defense sector.In raw materials, for energy and financial independence.For the Spanish bank, Solana says "gross strength in Spain, fixed rate at 2%, strength of capital, better and more profitable, and better distribution of capital to the owner".
The manager prefers Europe to the United States, and within Europe Spain's high GDP growth is around 2.5% and is higher than the rest of the region. "This progress is supported by immigration, but thanks to the strength of both companies' balance sheets and profitability, we are starting to see an improvement in productivity," explains Solana.
The Santander Small Caps Fund, which received 3.5% this year at its highest level, has Indra, Sacyr, Técnicas Reunidas, Grenergy, Almirall, Elecnor and Fluidra in its portfolio.It also integrates the Danish Be Semiconductor industry.Danieli & C Officine Meccaniche of Italy and large capital companies such as Allfunds Group and Zegona.
Small- and mid-cap stocks have been on the radar of investors for some time, although only recently are expectations starting to come true and they've managed to beat bigger companies.
From now on, Renta 4 warns that the current challenge is not only to generate profits, but to improve market sentiments towards small securities, which are dampened by high bond yields, and to prioritize liquidity and investment from passive management to issues such as artificial intelligence dominated by large capital companies.The portfolio of his Renta 4 Small Cap Global fund includes European companies Fielmann, Zalando, Stroer, Strabag, Fagron, EVS Broadcast Equipment, e.l.f.Beauty, Catalyst Pharmaceuticals, Align Technology, Bath & Body Works and Simply Good Foods Co., 2%, Rovi Spas, 2% are weight spas. Viscofán, Puig, HBX Group Internacional and Vidrala, among others.
According to Benjamin Melman, investment director at Edmond de Rothschild, “It is preferable to increase the proportion of undervalued assets with a low presence in the portfolio that are already showing signs of recovery.”In his opinion, this is particularly true for European small-cap companies, which will benefit from stronger internal growth, the expert's expected progress towards capital markets union and possible interest rate cuts by the ECB.“An expansionary economic policy remains possible in the United States, so American value stocks can also play a role in a diversification strategy,” he concludes.
