Schwab Network The 4-Step Bull Case for Small Cap Double Digit Growth
Jan 23, 2026
Mike Rode, Senior Investment Director at American Century Investments, previews a small-cap revival and what could drive it. He highlights accelerating earnings as the catalyst. He outlines four key tailwinds and names sectors that may benefit. He also discusses renewed IPO and M&A activity.
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Small Caps' Leadership Could Continue
- Small caps have led since Liberation Day and are poised to keep outperforming if earnings accelerate.
- Attractive valuations plus potential earnings acceleration contrast with richly valued large caps losing momentum.
Four Drivers Behind Earnings Acceleration
- Mike Rode lists four drivers likely to accelerate small-cap earnings this year.
- Rate cuts, a tax bump, accelerated capex depreciation, deregulation, and reshoring underpin his thesis.
Look For Contrarian Small‑Cap Sectors
- Consider underowned small-cap sectors like regional banks and energy as contrarian opportunities.
- Look for improving fundamentals, institutional underweighting, and heavy short interest that could flip sentiment.