The start of a better seasonal month for the stock market and the Fed's decision to continue maintaining the interest rates near-zero until next year should bode well for fundamentally sound small-cap stocks such as Tennant Company (TNC), Standex International (NYSE:SXI), Donnelley Financial Solution (DFIN), and AdvanSix (NYSE:ASIX). Read more to learn why.The futures of the S&P 500 and the Dow Jones Industrial Average edged higher this morning, after a dip on Wednesday over concerns of the tech sector’s underperformance in a rising interest-rate environment. Significant job growth last month, a moderate drop in the unemployment rate, and Senate Majority Leader Chuck Schumer’s recent announcement that the chamber had reached a deal to avoid a government shutdown this week should give a boost to the stock market in the upcoming days. This, along with the expected continuation of the low-interest-rate environment, should benefit small-cap stocks.
Moreover, with a sustained rally in the stock market over the past few months, many large-cap stocks have become highly overvalued. Therefore, quality small-cap stocks that remain under the radar should offer better returns.
We think Tennant Company (TNC), Standex International Corporation (SXI), Donnelley Financial Solution Inc. (DFIN), and AdvanSix Inc . (ASIX) could be strong bets now, considering their expanding market reach and fundamental strength.