The markets are still caught between competing macro-narratives, with periodic data releases offering little clarity. The May jobs report was slightly better than expected, as nonfarm payroll employment increased and wages ticked up slightly. But prior-month revisions and Challenger layoffs muted some of the positivity surrounding the gains. Likewise, recession predictions have also begun to cool, but the specter of tariff-induced inflation looms as U.S.-China trade talks seem to have stalled.

In the center of it all, investors continue the never-ending search for yield and stability. One of the areas that seems to have been overlooked is the Small and Mid Cap (SMID) space. With high yield spreads rallying and cross-asset volatility subsiding, SMID might warrant a fresh look.

Don’t Look Up (Look Down) 

If we are indeed past peak tariff uncertainty, one of the reasons to dig back into the SMID space is to pick up where investors left off earlier in the year before a sizable 28% drawdown. 

Assuming a less volatile stretch ahead, the increase in M&A activity and easing of regulatory burdens should have a greater impact on small and mid-sized organizations. We’ve already seen an increasing number of strategists turn constructive on the sector, moving away from Mag 7-related investments that tend to garner the most attention. 

As for Hilton’s approach, we’re still very much in a risk-aware posture. The Hilton Small and Mid Cap Opportunity (SMCO) investment team is maintaining focus on names poised to take advantage of easing regulatory burdens and an increase in M&A. In the event headwinds pick up with subsequent data releases, we think these same companies are better positioned to withstand potential disruptions. This will be particularly important as we continue in an elevated interest rate environment. 

What This Could Mean for Clients 

When there’s a space that appears to be undervalued, such as the smaller end of the SMID sector, it’s always tempting to overweight this opportunity. The Hilton investment team isn’t calling for a full-on small cap revival, merely noting that we think that an opening exists to capitalize on this moment. But with plenty of noise in the markets, it’s imperative to diversify a SMID strategy with more durable mid caps to stabilize a portfolio.

"One of our key goals at Hilton Capital is to expand our product suite, and we believe this new ETF introduces a unique and underappreciated segment of the fixed income market to investors. Business Development Companies (BDCs) and their associated debt offerings represent a growing component of the overall investment-grade corporate debt universe. By partnering with Solactive to create a comprehensive index of these offerings and launching an ETF that tracks that index, we are continuing the industry trend of democratizing access to specialized areas of fixed income—areas that have traditionally been available only to more institutional investors.”

- Craig O’Neill, Chief Executive Officer

Distributed by Foreside Fund Services, LLC

"The labor market’s just hanging in there and it doesn’t give the Fed the ingredients that it needs to aggressively cut rates unless something happens very negatively, which is not occurring.”

- Alexander D. Oxenham, CFA®, Partner & CIO

In this video Hilton's Investment Team discusses the Small and Mid Cap Opportunities Strategy and what makes it unique in the investment ecosystem.

News About Uncertainty Isn’t New—But This Piece Is Worth Your Time 

Market volatility and policy-driven uncertainty aren’t breaking news to investment professionals, but the May 2025 Chief Economists Outlook from the World Economic Forum delivers real substance. 

With 82% of top economists citing very high uncertainty and 87% expecting delayed business decisions, this report unpacks what’s behind the headlines: trade policy, AI disruption, and recession risks. 

Perspectives from UBS, ICBC Standard Bank (a joint venture between the Industrial and Commercial Bank of China and Standard Bank Group), European Bank for Reconstruction and Development (EBRD), plus a video summary, make it well worth a look.