Money market funds will find a home in small caps when rates fall, Needham's Chris Retzler

Small Cap Market Overview - Small caps have been underperforming for the last couple of years, but are entering a potentially favorable period with anticipated revenue acceleration [2] - Lower interest rates are generally favorable for small caps, but tariff concerns pose a challenge due to smaller companies' potentially limited ability to manage them [1] - Tax certainty and deregulation can counterbalance the negative impacts of tariffs [3] - Capital markets are open for both equity and debt, and M&A activity is a tailwind for the asset class [4] - Rate cuts by the Federal Reserve may drive money into equity markets, potentially benefiting small caps due to their tighter liquidity [6][7] Company Specifics - Generac is favored due to its data center play involving diesel backup generation, with new products competing with incumbents in a market with sizable demand for backup power [9] - Badger Meter, a water meter business, is attractive due to meter replacement cycles and infrastructure buildout [10] - Adtran is considered a good value play, poised to benefit from increased investment in rural broadband buildout [10] Potential Risks and Uncertainties - Tariffs remain an impact for many companies, and they desire more certainty, especially regarding China tariffs [4]