The U.S. Federal Reserve will publish its interest rate decision on Wednesday, October 29. The market expects a decrease by 0.25 p.p. - To 3.75-4%. Its previous revision in September 2025 led to a revival of the stock market, and the "clear winner" of this analysts called small-capitalization companies, which are included in the Russell 2000 index. The day after the Fed's decision, Sept. 18, the index set its first record in four years, jumping 2%. Over the past six months, the Russell 2000 has added 28.4%, outperforming the S&P 500 index, the benchmark for large-cap companies. It is up 23.8% over the same period.

Freedom Broker, at Oninvest's request, named five small-cap companies that could benefit from the Fed's rate cut.

Industrial Logistics Properties Trust

Industrial Logistics Properties Trust , a real estate investment trust (REIT) with a market capitalization of $400 million, could benefit from monetary easing as it will be able to refinance a significant amount of liabilities, according to Freedom Broker. The move is necessary because more than 33% of this company's floating-rate debt matures in 2026, analysts said.

The Trust owns and leases industrial and logistics facilities. Since the beginning of the year, its quotations have grown by almost 65%, to $6. Freedom sees them as having upside potential of nearly 12%. However, analysts note, this REIT cannot be classified as a traditional core asset - that is, high-quality, low-risk real estate. "Rather, it is a tactical, counter-intuitive bet on management's ability to implement a deleveraging plan," Freedom writes.

The REIT has a total of two "buy" ratings from Wall Street analysts and two "hold" ratings. The average target price is $6.85, MarketWatch shows. That's a potential upside of 14.5% to current quotes.

Millrose Properties

This REIT ( $5 billion capitalization) could benefit from a rebound in developer and homebuyer activity - thanks to more affordable mortgages.

Millrose Properties, according to Freedom, represents an interesting opportunity in the residential development sector due to its unique HOPP'R model - providing capital to developers to purchase and develop land parcels through an option scheme. Millrose's strategy is based on a partnership with industry leader Lennar, which provides stable demand and mitigates risk, the analysts said.

Freedom notes that REITs focus on permissioned areas and short cycles to help reallocate capital quickly and benefit from the industry's shift to an asset-light model - with minimal asset ownership and outsourcing of most functions.

The target price of Freedom is $39, which is about 20% higher than the closing price of the securities on October 24 ($32.4). In total, the company's securities have five ratings from Wall Street analysts and all of them are buy. The average target price is $37.7, which means the growth potential is 16.4%.

Sky Harbour Group

For developer Sky Harbour Group($790.4 mln), the rate cut may be a good thing because of its high debt load. The debt-to-capital ratio of the company is 87.6%, notes Freedom. The developer specializes in construction, leasing and management of agrarian complexes for private aviation in key U.S. airports, where demand significantly exceeds supply, analysts say. In addition, Sky Harbour has developed a business model that allows it to achieve occupancy rates of 120-130% through the use of previously unused space.

Freedom believes Sky Harbour's share price could rise to $11. That's a potential upside of 5.7% to the stock's closing price on Oct. 24.

Other Wall Street analysts are more optimistic: the consensus forecast for its share price is $17.08. This is 64% higher than the current quotations. The company's securities have five "buy" and one "hold" recommendations.

Global Water Resources

Global Water Resources($289.6 million), which operates water and wastewater systems, could reduce interest expense and improve cash flow by refinancing the expensive part of its debt - about 18% of its volume is 5.5% paper. At the same time, short-term risks for the company are minimal: about 60% of the debt is due after 2035, Freedom notes.

Analysts at Freedom set a target for the company's securities at $10.5, which corresponds to the current value. It is worth adding the dividend yield, which for Global Water Resources securities is 3%, analysts say.

According to MarketWatch, the company is tracked by three analysts and all recommend buying its stock. The average target price of $14.17 means the stock could rise 35%.

Unitil Corporation

Utility company Unitil Corporation ($898.1 million) has also placed a large portion of its debt - about 19% - at a Fed Funds rate of 5-5.5%, which means it will benefit by refinancing it and reducing interest expense. Unitil Corporation supplies electricity and natural gas in established New England markets. Freedom considers it an attractive investment due to its robust regulated model and clear strategy to grow through point acquisitions.

In addition, Unitil adheres to a stable dividend policy, providing a yield of about 3.8%, analysts note. They set a target for the company's securities at $56, which implies a potential upside of almost 11.6% to the closing price on October 24 ($50.2).

The company's securities have a total of two ratings from Wall Street analysts and both of them are "buy". The average target price of $59 implies a 17.5% upside potential.

What Wall Street is saying about the prospects for small-caps

Wall Street is cautiously optimistic about the outlook for the Russell 2000 index and attributes it mainly to further rate cuts. According to Glenmede strategists Jason Pride and Michael Reynolds, the hour of the small companies has come: they predict that the net profit of the Russell 2000 index companies will exceed 35% in the third quarter. They believe the trend could continue through the end of the year, thanks to the Fed's monetary easing cycle.

Noble Capital Markets noted that for investors in small-caps, the Fed's actions could be a game changer. Lower interest rates reduce the burden, freeing up capital for expansion and making this segment more attractive to investors.

The Russell 2000 could benefit from a rate cut, but optimism about small-cap stocks carries risks, eToro U.S. investment analyst Brett Kenwell said. If the U.S. economy slows down or the Fed cuts the rate incompletely, this asset class will face difficulties, Kenwell noted.

Investors should pay attention to large-capitalization companies, even though "it may seem counterintuitive," says Daniel Skelly, head of Morgan Stanley 's asset management market research and strategy group. He points out that a possible cooling labor market and slowing economic growth could be a problem for many low-quality and loss-making companies.

The growth that small-cap companies showed in the third quarter is unlikely to continue in the next three months, according to Adam Parker, founder of Trivector Research . He attributed this to the "structural inferiority" of this asset class due to "certain group characteristics" - there is "more junk than quality" among them, they are less profitable than large issuers, and investing in them is riskier.

Does not constitute an investment recommendation.

This article was AI-translated and verified by a human editor

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