Setup for small cap earnings growth in 2026 looks stronger, says market strategist

Melissa Lee (Reporter) 00:00.070

neither russell two thousand has had a strong year hitting all time highs a few weeks ago and pacing for its eighth straight month of gains its best run since mid twenty twenty one but what can we expect for the group in twenty twenty six let's turn to our resident small cap

Melissa Lee (Reporter) 00:12.510

expert julie beal what do you think the backdrop will be for small caps julie

Julie Biel (Portfolio Manager) 00:17.350

i think it looks pretty positive you know small caps are more economically sensitive and they should be benefiting from lower interest rates because they tend to borrow on a variable interest rate market but it's been kind of a crazy year it's been eighteen months of me saying

Julie Biel (Portfolio Manager) 00:29.590

look small caps are going to start to outperform once the earnings really comes through and then what ends up happening is the small caps outperform but it's the companies that have no earnings it's companies like biotech it's companies like quantum it's the lowest quality parts

Julie Biel (Portfolio Manager) 00:41.630

of the small cap market and it's been pretty confusing for most active long managers i think something like ten percent of them are beating their benchmarks certainly not me and it's left us all kind of in a real quandary like waiting for you know to be the bridesmaid and

Julie Biel (Portfolio Manager) 00:55.670

finally no we're still not chosen right for quality but i do think that over the long term earnings growth is what really matters and the setup for twenty twenty six is more favorable for small cap than it is for large cap and midcap even the mag seven so i think that's a good

Julie Biel (Portfolio Manager) 01:10.230

place to look a few names i like ollie 's is this discount bargain value retailer and i think everything that's value customers are so starved for value it doesn't matter what income spectrum you are if you can prove that you can deliver real value you really tend to outperform

Julie Biel (Portfolio Manager) 01:25.310

and i think they're still well positioned they've been doing great lemaitre is a healthcare company that has very differentiated products that it sells to vascular surgeons it's just been this kind of quiet compounder that's finding pricing that's finding margin and i think it's

Julie Biel (Portfolio Manager) 01:39.110

really well positioned and so if you don't have a lot of healthcare exposure it could be an interesting name for you and the last one we talked about briefly moles you know this is a company that has been swooping up all of the best bankers in the downturn of private equity and

Julie Biel (Portfolio Manager) 01:52.510

so they have some of the best investment bankers they were on the netflix deal and they announced with warner brothers i just think they're quite well positioned and their earnings can really inflict pretty materially from here especially with a better regulatory backdrop so

Julie Biel (Portfolio Manager) 02:05.190

those are just a few names i'm thinking of

Melissa Lee (Reporter) 02:08.830

guy

Guy Adami (Contributor) 02:09.270

yes yes melissa by the way yes i mean she worked more than two hours to bring that to light today

Melissa Lee (Reporter) 02:14.630

well three picks yes absolutely

Guy Adami (Contributor) 02:16.830

tremendous job by julie beal please

Melissa Lee (Reporter) 02:18.670

at least two and a half hours please

Guy Adami (Contributor) 02:20.830

at least

Melissa Lee (Reporter) 02:22.350

did you like any of those pics melissa is sort of an interesting one you know without question

Guy Adami (Contributor) 02:26.750

she's been talking about it for a while and it's performed for a while i will say this though quickly in terms of small caps obviously economically sensitive very i'm going to paint with a broad brush here but if rates are going higher for the wrong reasons if the unemployment

Guy Adami (Contributor) 02:39.750

rate starts moving higher again which is what we're going to see it's going to be very hard in my opinion for small caps continue in twenty six