Money managers say Europe's small stocks rally has just begun

As 2025 kicked off, Michael Oliveros was finding it hard to sell European equities with a smaller market capitalisation.

- MARGARYTA KIRAKOSIAN MICHAEL MSIKABA

Investors were piling into larger stocks, in a wager that US President Donald Trump's tariff threats wouldn't materialise. Economic growth was proving resilient and optimism around corporate earnings had propelled the large-cap Stoxx Europe 600 Index to record highs.

Some eight months later and Mr Oliveros, head of global small caps at $2 billion asset manager Invesco Ltd, has a far more receptive audience. Sentiment has been flipped on its head as Trump's erratic trade policies and sweeping tariffs upend the global economic order.

The Stoxx Europe Small 200 Index has rallied 21% since a low in April that was sparked by Trump's “liberation day” tariff announcement, compared with a 17% gain in its large-cap counterpart. Higher domestic exposure means it has also benefited from a 13% surge in the euro this year.

Mr Oliveros’ €793 million ($928 million) Invesco Continental European Small Cap Equity fund has beaten 82% of peers in the past year, with Austrian bank Bawag Group AG, Swedish firm Asker Healthcare Group AB and UK construction materials company SigMaRoc Plc among its biggest holdings.

“At the beginning of the year, I went on a road show in Germany and not many people wanted to talk about small caps,” Mr Oliveros said in an interview. “Now it is sort of the opposite: everybody's very interested in having a conversation.”