(Bloomberg) — Canadian small-cap stocks – unloved and often ignored – have caught a wave, thanks to cooling inflation and a surge in deal activity.
A benchmark index of smaller Toronto-listed stocks has returned 12.3% this year in Canadian dollar terms, including dividends, outperforming larger domestic firms and the MSCI World Small Cap Index, and some portfolio managers say the trend is poised to continue.
It’s partly about the economy and the odds of a soft landing. The global growth outlook is healthy enough to keep oil above $75 a barrel, yet inflation is cooling, offering hope that the Federal Reserve will cut rates soon. Those factors help the S&P/TSX Small Cap Index, with is laden with oil and gas, gold and silver companies. Materials and energy stocks constitute about 54% of the gauge.
Meanwhile, dealmaking has boosted stocks like steelmaker Stelco Holdings Inc., one of biggest names in the index, and Heroux-Devtek…
