If you’ve been ignoring small caps… now’s the time to pay attention.
For the past few years, small-cap stocks have underperformed their larger peers. But that’s about to change—and in a big way.
We’re staring at one of the most attractive setups for small caps in over a decade. In fact, this is the kind of environment where 5x… even 10x returns are possible—if you know where to look.
Here are five major tailwinds lining up to push small-cap stocks significantly higher…
1. Lower rates are coming—and that’s huge for small caps
The Fed might be dragging its feet now… but interest rates are headed lower, and markets know it.
In fact, long-term interest rates and inflation suggest the Fed is already behind the curve. We should have seen cuts by now.
Fed Chair Jerome Powell has been deliberately cautious, citing persistent inflation as a reason to hold off on cuts. But with his term ending in May 2026, a new Fed leader is likely to reduce rates at a much faster pace.
And when rates start dropping—potentially by 1.5–2%—it’ll unlock a frozen housing market, boost consumer spending, and send asset prices higher.
Why does that matter for small caps?
Because smaller companies are much more sensitive to interest rates. They borrow more, have tighter margins, and rely heavily on affordable capital to grow. Put simply, lower rates disproportionately benefit domestic-focused small caps.
2. The Trump Administration is going all in on U.S. businesses
President Trump’s policies are setting up a massive windfall for U.S.-focused companies—which just happen to be mostly small caps.
From “America First” manufacturing to increased defense spending and tax credits for domestic production, the goal is clear: bring jobs, capital, and innovation back to U.S. soil.
Most small caps are domestically focused—they don’t have the global exposure (or red tape) of large-cap multinationals. That makes them prime beneficiaries of new federal contracts, tax incentives, and pro-U.S. policies.
Sectors like defense, infrastructure, materials, and industrials stand to see billions in new contracts and tailwinds under this policy shift.
3. Deregulation is unleashing small banks
One of the biggest (and most overlooked) pieces of this puzzle is the deregulation of small banks.
Historically, small financial institutions have been penalized for growth. For instance, when they reach $100 billion in assets, their capital requirements suddenly skyrocket.
But that’s changing fast.
The new regulatory regime is easing those thresholds, giving smaller banks room to scale, lend more aggressively, and even merge with peers. And since financials are the largest sector in the Russell 2000 small-cap index, this is a major deal.
Expect a surge in lending activity, mergers and acquisitions, and profits from regional banks and niche financial players.
4. Massive spending on infrastructure, energy, and AI power demand
The U.S. is in the middle of a trillion-dollar wave of capital spending—from highways to power grids to AI data centers.
The overlooked lynchpin here: natural gas.
We’re going to need an extra 300+ gigawatts of electricity over the next five years just to support surging power demand from AI. For reference, that’s enough power to run every home in America—and then some.
And nuclear can’t get us there in time.
That’s why small-cap natural gas producers and infrastructure players are in the ideal position. They’re cash-flow machines trading at dirt-cheap valuations, many with the tech and contracts already in place to scale.
It’s not just energy—defense and construction small caps are also poised to benefit from Golden Dome initiatives, drone deployments, and multi-year public works budgets.
5. Crypto and stablecoins are officially going mainstream
One of the fastest-growing sectors in the market right now is crypto.
We’re not just talking about tokens. We’re talking about small-cap stocks with serious exposure to digital assets, stablecoins, and decentralized finance infrastructure.
Names like Galaxy Digital (GLXY) are already ripping higher—up 40% in weeks—and they’re just getting started. With the recently IPOed Circle (CRCL) already processing trillions of dollars, it’s only a matter of time before Wall Street dives headfirst into crypto equities.
Stablecoins alone are projected to grow from 1% of the U.S. money supply to 10–15%. That’s a multitrillion-dollar runway—and small-cap companies are the early movers here.
How to play the upside in small caps
If you’ve been waiting for the perfect storm to bet on small caps… this is it.
Don’t just buy the index. Dig into individual names with real growth potential, strong catalysts, and market tailwinds at their back. Keep a close eye on sectors like:
- Biotech
- Regional banks
- Natural gas
- Defense
- Manufacturing
- Construction
- Crypto stocks
These sectors are primed to benefit from the coming surge in small caps.
Or, let Frank do the research for you. Earlier this week, in Curzio Venture Opportunities, he just recommended a tiny biotech with revolutionary cancer-fighting technology and one of the best risk/reward setups he’s ever seen.
Access the stock—and our full portfolio of small-cap names—when you join today.
