According to experts at UBS, smaller-cap stocks may finally begin catching up to their larger counterparts and represent a strong investment point in 2025. Amid increasing interest rates, the Swiss investment bank remains bullish on certain select mid and small cap stocks.
Smaller Stocks Barriers
Over the past few years, the S&P 400 MidCap and S&P 600 SmallCap indexes have been inseparable from the S&P 500 stock market index. The waiting game caused by factors such as tighter monetary policies, uncertainty in the economy, and increased cost of capital were detrimental to these smaller-cap stocks.
UBS, however, estimates an overturn quite soon and resumes its growth, with the acknowledge headwinds of lower price inflation and increased economic resilience.
Investment Approach with Stock Picks
UBS has compiled a compilation of 40 mid and small-cap stocks that they believe will outperform with an estimated increase of 106%. The strategy here will be to diversify with a broad variety of stocks among several industries and actively chasing growth. Cyclical macro trends targeting stocks with robust balance sheets and competitive moats form part of the list.
Source : Business Insider
