Live Markets: SocGen sticks to overweight call on small-caps

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19/05/2026 11:42

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SOCGEN STICKS TO OVERWEIGHT CALL ON SMALL-CAPS

It's been almost a year since Societe Generale slapped an overweight rating on small caps versus large caps and they're sticking with that view.

In fact they say the asset class is re-emerging as an attractive segment across regions - particularly in the euro zone.

Among the metrics they track to bolster their positive view is M1 monetary growth - a measure of how much liquid cash is in the economy - as well as PMI new orders-to-inventories ratio. SG says both are supportive of their view on small caps.

Also helping matters are valuations and the EPS growth outlook.

"Euro zone small caps continue to trade at a meaningful discount to both their own history (13.5x vs 14.2x 10Y average) and to large caps (c.10% discount vs a 4% premium on a 10Y average basis)," they write, adding that this gap remains wide despite improving macro conditions.

The backdrop including Middle East developments might be complex for small caps, but their more domestically geared revenue mix somewhat cushions them from tariff risks and external shocks, says SG.

"...small caps now have higher Oil & Gas sector exposure (7% vs 4% for large), leaving them more sensitive to rate dynamics than to oil price increases alone".

The team expects two rate hikes from the ECB in 2026, versus the three the market is currently pricing in.

On the AI front, the picture is mixed. While small caps with higher IT exposure seem better positioned to benefit directly, the segment's tilt to industrials provides greater leverage to the electrification theme.

(Lucy Raitano)

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