As the US presidential election approaches, the "bottom fishing opportunity for small-cap stocks may have matured"!

The well-known American financial services company Cantor Fitzgerald stated that, with a perfect combination of factors before the US presidential election, small-cap stocks are expected to catch up.

In the recent market rebound, US small-cap stocks have lagged behind, with the Russell 2000 Index rising by 2.5% last month, while the S&P 500 Index surged by nearly 4%.

This situation may change, as small-cap stocks typically perform well as the presidential election approaches. Cantor Fitzgerald indicated that recent polls supporting Trump also bode well for this sector.

The company mentioned that the Russell 2000 Index has been a "major laggard." Chief strategist Eric Johnston stated in a report on Monday that in the current bull market, "the timing to bottom out (the Russell 2000 Index) may have matured."

Johnston mentioned that historically, the Russell 2000 small-cap stock index tends to experience significant fluctuations around the presidential election, with 4 out of the past 11 election years seeing a rise of 6.5% or more within 13 days after the election. This impact tends to be even greater towards the end of the year. In four of those years, the Russell 2000 Index saw gains of 12% or higher before the year-end.

Johnston acknowledged that each election year has unique conditions, but data shows that the Russell 2000 Index is likely to "rise significantly" around the election.

Johnston also predicted that the chances of Trump winning will increase, benefiting small-cap stocks even more. He cited data from RealClearPolitics, which shows that without swing states, Trump would win 302 electoral votes, while Vice President and Democratic candidate Harris would get 236.

Johnston mentioned that this does not include Trump's performance in swing states in 2016 and 2020 exceeding the predicted records, indicating that Harris would need to win by a larger margin in key states than current polls suggest.

He admitted that politics can change rapidly, but with no more debate schedules, Harris' chances of turning the tide have decreased, as Trump often gains the upper hand in interviews and rallies.

Johnston said, "Overall, there seems to be little opportunity to change the current favorable momentum for Trump."

Johnston stated that a Trump victory would benefit domestic US companies by lowering tax rates, increasing tariffs, reducing regulations on small businesses, etc. These factors would boost investor confidence, encouraging them to shift more towards riskier, underperforming small-cap stocks.

Johnston mentioned that even if Harris wins, these macroeconomic conditions would still lead to a strong performance of small-cap stocks relative to large-cap stocks, as the market has not priced in the possibility of Trump winning too much.

As Johnston made the above remarks, others warned that uncertainty in the market is looming ahead of the upcoming presidential election. With polls showing both sides' support rates still close, some predict that once the voter results are determined, market volatility will ease. **