---
title: "Four Reasons to Buy Overlooked Small-Cap Stocks at the Beginning of 2026"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/272559915.md"
description: "Reasons to buy small-cap stocks in early 2026 include: the undervaluation of small-cap stocks, with the forward price-to-earnings ratio of the S&P SmallCap 600 Index being lower than that of large-cap stocks and close to the ten-year average; the benefits of interest rate cuts will become apparent in 2026, reducing borrowing costs for small businesses; the new tax law relaxes the cap on interest expense deductions, enhancing net profits for small companies; analysts predict that the earnings per share growth rate for small-cap stocks will reach 19.1%, higher than the 13.6% for the S&P 500"
datetime: "2026-01-14T13:29:54.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/272559915.md)
  - [en](https://longbridge.com/en/news/272559915.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/272559915.md)
generator: "portal-rs"
---

# Four Reasons to Buy Overlooked Small-Cap Stocks at the Beginning of 2026

Attractive undervaluation relative to large-cap stocks: The forward price-to-earnings ratio of the S&P SmallCap 600 Index is not only lower than that of large-cap stocks but also below its ten-year average valuation level. Its valuation discount relative to the S&P 500 Index is approaching the highest point in 20 years. The benefits of interest rate cuts begin to permeate the real economy: The series of interest rate cuts initiated by the Federal Reserve in 2024 has an approximate lag period of 18 months, with 2026 being the stage where lower borrowing costs fully translate into financial advantages for companies, especially for small businesses sensitive to capital costs. Profit boost from the new tax law (One Big Beautiful Bill): The new legislation relaxes the interest expense deduction limit from 30% of EBIT to 30% of EBITDA. This allows small companies with high depreciation and amortization costs to obtain more tax relief, directly enhancing net profits. Higher expected earnings per share (EPS) growth rate: Analysts predict that the EPS growth rate of the S&P SmallCap 600 Index will reach 19.1% in 2026, significantly higher than the expected growth rate of 13.6% for the S&P 500 Index

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- [BILL.US](https://longbridge.com/en/quote/BILL.US.md)

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---
> **Disclaimer: This article is for reference only and does not constitute any investment advice.**