Core Viewpoint - The sentiment surrounding U.S. small-cap stocks is extremely low, which may create an opportunity for a significant rebound, according to Julian Emanuel from Evercore ISI [1][2]. Group 1: Market Sentiment and Predictions - Small-cap stocks have been underperforming compared to large-cap stocks for over a decade, and many on Wall Street consider them one of the least favored sectors [1]. - An internal survey by Evercore ISI indicates that the market's expectation for small-cap stocks to outperform large-cap stocks by the end of 2025 has dropped to single-digit levels [1]. - Despite the weak performance of small-cap stocks year-to-date, Emanuel believes the current negative sentiment is a positive sign for future performance [1]. Group 2: Factors Supporting Small-Cap Stocks - Seasonal factors may trigger a rally, as historical data shows that small-cap stocks typically perform well in June, possibly linked to the annual adjustments of the FTSE Russell index [2]. - Small-cap stocks are currently valued lower than their long-term averages, which could support a continuation of the rally [2]. - Evercore ISI forecasts a 0.9% growth in U.S. GDP for 2025, which is expected to avoid a recession while not being strong enough to halt the Federal Reserve's rate cuts, creating a favorable environment for small-cap stocks [2]. Group 3: External Influences - Easing trade war concerns and the passage of key budget proposals by President Trump may provide additional momentum for small-cap stocks [3]. - Previous predictions by analysts, such as Tom Lee from Fundstrat, suggested a potential 40% rebound for small-cap stocks, which saw some validation in mid-2020 but ultimately did not sustain [3]. - As of now, the Russell 2000 index has declined by 3.8% year-to-date, while the S&P 500 has increased by over 2%, although small-cap stocks have shown a strong start in June [3].

Group 1 - The temporary suspension of reciprocal tariffs by the Trump administration is seen as a correct decision for the global economy and may act as a catalyst for a reversal in certain stock market trends, particularly benefiting small-cap stocks that have underperformed long-term [1] - Small-cap stocks are particularly sensitive to regulatory costs and tariffs, and a relaxation of regulations could create a more favorable development environment for these companies, potentially leading to unprecedented opportunities for small-cap stocks [1][2] - Despite a robust U.S. GDP growth and low unemployment, small-cap stocks have not been able to recover, with investors favoring large-cap stocks for their perceived safety, further exacerbated by the AI boom directing funds towards tech giants [2] Group 2 - The potential for regulatory relaxation is viewed as a key to breaking the stagnation of small-cap stocks, which have not encountered a genuine opportunity for years [2] - There are three major concerns regarding small-cap stocks leading the market: the concentration of the S&P 500 in the tech sector, reliance on financing for expansion amidst high interest rates, and the entrenched investor preference for large-cap stocks due to their historical outperformance [2] - Despite significant obstacles, the current conditions may represent the closest opportunity for small-cap stocks to stage a comeback in years [3]