Small-cap stocks will be in a 'sweet spot' for quite some time: Royce Investments' Francis Gannon

• Small-cap stocks have been outperforming for 16 months, with earnings turning positive at the end of last year and expected to potentially surpass large-cap earnings by 2027.
• Key drivers for small-cap growth include Federal Reserve easing, benefits from the AI trend (e.g., data centers), reshoring of manufacturing, deregulation, and tax incentives like 100% depreciation on CapEx and R&D.
• Despite higher volatility, small-caps offer higher long-term returns and are currently 'under-owned,' indicating a potential decade-long cycle of outperformance.

Francis Gannon of Royce Investment Partners presents a strong bull case for small-cap stocks, highlighting their 16-month outperformance and positive earnings outlook. He attributes this turnaround to factors like Fed easing, AI adoption, reshoring, deregulation, and tax benefits, suggesting a prolonged period of small-cap outperformance.