WEEK AHEAD

NEW YORK: Small-cap stocks benefited from a dovish lining to the US Federal Reserve’s decision to raise interest rates this past week, but strategists warn it will take more to make these pricey stocks outperform their larger brethren in the long haul.

The Fed on last Wednesday raised rates by a quarter of a percentage point, as expected, but did not flag any plan to accelerate the pace of monetary tightening. A less aggressive monetary policy may benefit smallcaps, which tend to get hit harder as borrowing costs increase when rates rise

Stocks in the small-cap space rallied after the November 8 election that put Donald Trump in the White House as investors bet Trump’s plans to cut back on regulations and taxes would especially help small companies.

That hasn’t panned out in the new year, as they have underperformed the S&P 500 year-to-date. Their nearterm performance hinges on how much the profit picture improves, but so far small-cap earnings have yet to rebound in the same way that large caps have.

Investors consider small-cap stocks comparatively expensive.

“We’re in a show-me state for small caps,” said Steve DeSanctis, equity strategist at Jefferies. “We’ve