M&A and valuations drive optimism for US small caps

US small cap stocks have shown strong performance recently, with near double-digit returns in November and optimism building for 2025. Key factors driving this outlook include robust M&A activity—where small caps are frequently acquisition targets—attractive valuations compared to larger companies, and the potential for reduced regulatory burdens under the new administration. However, challenges such as inflationary pressures and a cautious Federal Reserve policy remain. This highlights the importance of selectivity, as identifying the strongest opportunities in US small caps will be crucial...