Small-cap stocks may not be showing signs of June gloom this summer. If that’s the case, investors may want to consider getting the Neuberger Berman Small-Mid Cap ETF (NBSM ).
Large-caps appear to have shaken off April’s sell-off, as seen in the S&P 500’s performance, which is back in the green. Now, it may be time for small-cap companies to make their move, according to global investment firm Evercore. And that move could come as early as this month. The Evercore team noted that small-cap outperformance typically comes in June after a strong rally by large-cap companies the previous month.
“Moreover when large size outperformance through May had been similarly vigorous as it was in 2025, June seasonality is especially pronounced,” Evercore noted.
We Know What Small-Caps Did Last Summer
When looking at the performance of the Russell 2000 last year, it appears to fit Evercore’s narrative. The index was up for the summer. It rose 10.43% between the start of last summer (June 20) until the end (September 22).
The index exhibited a notable spike in mid-July before retracing to its late June levels. Then it proceeded to rally once again heading into the fall of a notable election year.
This summer, small-cap stocks could certainly benefit from a rate cut. Even if the actual rate cut may not come until September, according to market forecasts, that expectation could already be priced in this summer. Fed easing benefits small-cap companies, which typically rely on debt to fund their operations. When rates fall, debt servicing costs also drop, thereby making it easier for small-cap companies to invest in their businesses.
“The case for small-cap outperformance is reinforced by an attractive multiple relative to large, and with the Fed on track to cut rates further while the economy is forecast to grow modestly in 2025," Evercore added.
An Active Option to Consider
Forecasts are just that, and there’s no telling what the small-cap market can do. That’s where a fund like NBSM is beneficial. Its active management allows investors to remain fluid amid constantly changing markets dominated by tariff news, interest rates, and geopolitical tensions. Because of this confluence of factors, investors will certainly want to be flexible.
NBSM’s portfolio managers can adjust holdings according to current market conditions. This flexibility offers NBSM investors protection from the downside while also capturing upside when small-caps exhibit strength.
Compared to their large-cap peers, small-cap companies carry considerably higher risk. To balance this exposure, the fund also invests in midcap stocks. Midcap equities can provide the growth characteristics of small-caps in combination with stability characteristics typically exhibited in large-caps.
With an eye on quality, NBSM searches for SMIDcap stocks that exhibit strong fundamentals. Those include consistent free cash flow generation, above-average profitability, conservative balance sheets, and differentiated business models with durable barriers to entry.
Click here to get more fund information on NBSM.
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