Stock Market Today: Dow Futures Rising After Trump Victory; Fed ...

Small-caps have underperformed their larger rivals for a decade. That might change under Donald Trump’s presidency but it depends on several factors.

The Russell 2000 index put in its strongest one-day percentage rise for two years on Wednesday after it became clear Trump had won the election. Futures tied to the index were up a further 0.6% early on Thursday.

Trump’s tariff and corporate tax policies are expected to boost companies with their operations and supply chains in the U.S. However, it’s not clear yet if Trump will pursue the most radical of his proposals, including a 20% tariff on all imports and an up to 60% tariff on goods from China. Traders will need to watch if those measures are watered down.

Another potential boost for the small-cap index would be if Trump’s presidency sees a boom in initial public offerings. Companies staying private for longer has been one reason for a shrinking small-cap market and a loss of access to potentially fast-growing stocks—especially in the dominant technology sector.

A final issue will be how Trump’s presidency affects the Federal Reserve’s monetary policy.

“Small caps have a golden opportunity to escape the mega-cap gap dominance, but headwinds may arise. The large fiscal footprint of President Trump’s agenda can force the Fed into a slower easing cycle and keep borrowing costs elevated, to which smaller companies are more vulnerable,” wrote Nikos Tzabouras, an analyst at trading platform Tradu.