Expects healthy US GDP growth (~2.5%) and further rate cuts, which is a good environment for small caps. The key is a profits recovery, which has been elusive. Lower tariffs would be a relative positive for smaller companies due to their thinner margins.

Investors are significantly underweight small caps relative to history. The decade of underperformance has been historically long, suggesting small caps could lead over the next decade.

Micro caps got extremely stretched in 2025, trading ~80% above long-term average on price-to-sales. Expects a give-back; they are more stretched than the rest of the small-cap market.