Market Overview - Wall Street experienced volatility at the start of 2025, following a significant sell-off in late 2024, with the Russell 2000 Index dropping 8.4% in December, its worst month since September 2022, but rebounding 0.4% in the first week of 2025 [1] - The "January Effect" is anticipated to drive smoother trading, characterized by a seasonal increase in stock prices during January [1][3] Investment Opportunities - Small-cap stocks that have declined in double digits or high single digits over the past month, with a Zacks Rank of 1 (Strong Buy) or 2 (Buy) and a Momentum Score of B or higher, are considered solid investment choices [2] - Notable stocks include: - Boundless Bio Inc. (BOLD): Market cap of 191 million, down 12% in a month, Zacks Rank 2, Momentum Score A [9] - Synchronoss Technologies (SNCR): Market cap of 1.3 billion, down 8.4% in a month, Zacks Rank 1, Momentum Score A, with an estimated earnings growth rate of 184.2% [11] - USANA Health Sciences Inc. (USNA): Market cap of $673.2 million, down 8.3% in a month, Zacks Rank 1, Momentum Score A, with an estimated growth of 26.1% [12] Economic Context - The economy is reported to be on solid footing, with household net worth at an all-time high and a healthy labor market, indicating a strong economic outlook [5] - Small-cap companies, being more domestically focused, are expected to outperform as the economy improves, supported by President-elect Trump's policies aimed at deregulation and lower corporate tax rates [5][6] - Reduced regulations are anticipated to lower operational costs for small-cap businesses, enhancing profitability [6] - The Federal Reserve's interest rate cuts, totaling 100 basis points since September, are expected to reduce borrowing costs for small businesses, facilitating expansion and profitability [7]
January Effect Builds Up Momentum: 5 Small-Cap Stocks to Buy