The Fed’s signal that it will start tapering its asset purchases this year indicates solid progress on the economic recovery. This, along with the expected continuation of the low-interest rate environment in the near term, we think makes the backdrop favorable for fundamentally sound small-cap stocks USANA Health (NYSE:USNA), EnPro Industries (NPO), Marcus & Millichap (MMI), Hollysys Automation (NASDAQ:HOLI), and Standex International (NYSE:SXI). So, it could be wise to bet on these stocks now. Read on.The major benchmark indexes Nasdaq Composite and S&P 500 closed at all-time highs on Friday after Fed Chairman Jerome Powell signaled that the central bank would start bond tapering this year. Also, the central bank does not intend to hike interest rates in the near term. The Fed believes that the economy is recovering with a significant improvement in employment and record GDP growth. This, along with the expected continuation of the low-interest-rate environment, should benefit small-cap stocks.
Investors’ interest in the small-cap stocks is evident in the iShares Core S&P Small-Cap ETF’s (IJR) 4.5% returns over the past month compared to the iShares Core S&P 500 ETF’s (IVV) 2.6% gains.
We think the expanding market reach of small-cap companies USANA Health Sciences, Inc. (USNA), EnPro Industries, Inc. (NPO), Marcus & Millichap, Inc. (MMI), Hollysys Automation Technologies Ltd. (HOLI), and Standex International Corporation (SXI) should help them capitalize on the rising consumer demand in a recovering economy. So, their stocks are expected to deliver solid returns in the coming months.