Small-cap stocks could see a significant boost under President-elect Donald Trump’s presidency, potentially doubling their value over the next two years, according to Tom Lee, head of research at Fundstrat.

What Happened: During an interview with CNBC on Friday, Wall Street strategist Lee expressed optimism for small-cap stocks, attributing this to Trump’s re-election.

The election results have already caused a surge in stocks as traders anticipate a new economic agenda, relaxed regulations, and tax cuts.

Lee believes there’s still significant potential for growth. He noted that the index is currently trading at around 10 times forward median earnings, a lower valuation than the S&P 500, which is trading at approximately 17 times forward earnings.

See Also: Jim Cramer Calls Trump’s Return To White House A ‘Huge Win For The Stock Market’

“I do think there’s still a lot of upside,” Lee stated, adding, “So I think small-caps could, over the next couple of years, outperform by more than 100%.”

Why It Matters: Lee’s predictions align with his previous forecast of a significant market rally following Trump’s victory. The surge is attributed to renewed investor confidence and a more business-friendly environment.

However, economists have warned of potential inflationary pressures following a Republican victory. These concerns stem from higher tariffs, a swelling budget deficit, and restricted immigration policies.

Previously, it was reported that the rising U.S. Treasury yields and the strengthening of the dollar following Trump’s return to the White House could potentially undermine the Federal Reserve’s efforts to reduce interest rates.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.

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