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Six small-cap stocks that may speed ahead as the economy slows

Gt diesel

Small-cap stocks are beating their bigger rivals.

The Russell 2000 Index RUT, -0.75% is up 6.5% this year, compared with 2% for the S&P 500 Index SPX, -0.31% of large-cap stocks.

This outperformance makes sense for three reasons. First, small companies are leaner. So they benefit more than larger companies from inflation, which appears to be heating up. As lean machines, more of the extra revenue drops to the bottom line.

They also benefit from the strengthening dollar more than large companies do. Big companies get more earnings abroad. A stronger dollar diminishes those foreign earnings in the translation back home to U.S.

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