Europe’s small caps bet on growth revival as US rivals grow

Unlock the editor’s digestion free

FT editor Roula Khalaf, chooses his favorite stories in this weekly newsletter.

Small European shares progressed in front of US peers this year, because investors have bets for investors to bet on an economic residue while trying to get the most of the Trade War.

Investors have previously flocked interest rates and the promise of Germany’s historical € 1TN Promise of Growth Booster to the previously unprecedented small and medium-sized companies.

Atlantic, along with the sweeping of tariffs in early April, the president was re-launching Wall Street’s decline, was replaced by MegaCap technological shares in early April. Small capital, which tends to close the falsion of the domestic economy, was behind.

This meant that the disagreement between the European and US capital was particularly clear among small and medium hats.

Since the beginning of 2025, the MSCI European Small and Medium Cover Index fell by 10.7 percent, the same index for the United States fell 2.6 percent.

Equivalent indicators for larger companies are 7 percent in Europe and 1.2 percent in the United States.

“We have seen an interest in the names of US investors, Europe, especially in Europe,” he said. Customers “high quality, preferably to spending the European infrastructure, and the German ‘bazooka’, and foreigners are high quality.

The falling debt costs also helped. The European Central Bank has doubled interest rates on 4 percent in June after the last cut on Thursday. The federal reserve politicians want to see and wait for them and wait and wait for the influence of inflation before they want to wait and wait for Trump tariffs.

“We had the US average caps (in our portfolio), but.

In Europe, small capital has been greater than 19 percent since 2022, but this gap began to narrow.

However, the relative return of optimism around the growth, along with the loss of larger export-oriented shares of the trade war, helped to narrow the gap in 2025.

Eftathopoulos said that “Postsalation of the Freedom was weakened in the Greek capital, which is in the middle of the German average and” a very strong performance story “.

“We play the topic of the domestic income in the world of trade violations,” he said.

Some analysts also say that smaller European companies have benefited from the updated enthusiasm of strategies, because investors are trying to choose the winners and losers with Trump’s trade.

“When I usually put passive investment in the world and look at Europe, I speak specifically when they look at active allocations,” he said. “Some of them, the prospects of companies in Europe are very wild in the current part of current tariffs, currency movements and stimuli plans.”

Fowler added that the United States was “very difficult to make a case for our small caps” due to fears on the influence of the US economy.