Following a loss of investor interest during the COVID pandemic, Small and Mid Caps (SMID Caps) are coming back to the fore, mainly in Europe. Indeed, European SMID Caps offer investors diversification when they are looking for alternatives outside the US.

In Europe, the economy is currently boosted by two stimulus measures in Germany and at the EU level which should increase domestic demand which would drive SMID Caps. In addition, these companies, generating most of their revenues in the EU region, have not been as affected by the increase of tariffs imposed by the US in April 2025.

Finally, European SMID Caps have also benefited from the decrease of interest rates by the ECB’s rate cuts, which are giving a fillip to the economy.

We hence advise investing in European SMID Caps through ETFs or Funds that provide exposure to European Small Caps or Mid Cap companies.