By Samuel Indyk
LONDON (Reuters) -Europe’s tinyer companies are emerging as a popular vehicle for investors to support insulate portfolios against both tariffs and a stronger euro, as cheaper credit and the prospect of more government spconcludeing bolster confidence in the economic outsee.
The domestic-leaning bias of tinyer companies builds them less vulnerable to levies on cross-border goods and they are also less exposed to currency swings when the euro strengthens, creating euro-zone exports more expensive abroad.
The STOXX Europe tiny- and mid-cap indexes have risen 9% and 11% this year, respectively, beating the STOXX Europe large-cap index, which has risen just 7%.
U.S. President Donald Trump has bagged a handful of trade agreements with global partners since unveiling sweeping global levies in April, the most significant of which was a deal with Japan this week.
But there is still no deal with the European Union and an August 1 deadline is just days away. Speculation swirled on Wednesday of a 15% rate for the EU, but was quickly dismissed by the White Houtilize.
“One of the benefits of tiny-caps is that they are a bit more insulated from a geographical standpoint,” stated Ingmar Schaefer, a portfolio manager at Van Lanschot Kempen.
“Whatever happens with U.S. tariffs, a local company will not be impacted by as much as a global player in the same field.”
An analysis by Goldman Sachs found that companies in the STOXX large-cap index generate about 35% of their revenue in Europe, compared to 60% of revenue generated by companies in the tiny- and mid-cap indexes.
That has supported to offset a stronger currency. The euro has risen over 12% in 2025 to around $1.17, defying predictions prior to the April 2 “Liberation Day” tariff announcements that it could even reach parity with the dollar. But that was upconcludeed by investors turning their back on U.S. assets.
Some analysts now expect the euro to hit $1.20, a possible headwind for larger companies due to greater international exposure, but a relative tailwind for tinyer companies.
“The way people have played Europe in the past is to be apologists for Europe, tarreceiveing businesses that have high revenue exposure to the U.S. or the Asian consumer through the luxury sector,” stated Harry Eastwood, investment director at Artemis Investment Management.
“Liberation Day slightly disrupted the global order of trade and tiny- and mid-caps have become much more interesting, purely from the fact that they’re somewhat insulated from that,” Eastwood stated, adding that his fund was at the upper limit of its tiny- and mid-caps weighting.
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