JEF‘s SMID-Cap Strategy—Our Half-Time Report: Raising Target & Earnings

Research evidence excerpt

JEF‘s SMID-Cap Strategy—Our Half-Time Report: Raising Target & Earnings

USA | Equity Strategy EquityJuneResearch25, 2026

STRATEGY NOTEJEF's SMID-Cap Strategy—Our Half-Time Report:

Raising Target & Earnings

It's been a volatile 1st half despite the VIX index <20, with Small ahead of Large Small ahead of Large by over 2200bps since

"Liberation Day" low

by ~1300bps, the largest gap in 1st 6M since '01. Small Cap outperformance Relative Performance of Small vs. Large

6.0

5.0cycle at 14M, beating Large by >2200bps. We raise our YE target to 3190, a new 4.0

3.0high and +6.5% from current levels. Earnings have not been impacted by higher 2.0

1.0

0.0oil; Now that commodity is falling, we raise earnings growth rate to 15.7%. The

Dec-25 Dec-30 Dec-35 Dec-40 Dec-45 Dec-50 Dec-55 Dec-60 Dec-65 Dec-70 Dec-75 Dec-80 Dec-85 Dec-90 Dec-95 Dec-00 Dec-05 Dec-10 Dec-15 Dec-20 Dec-25

bad news: active struggling QTD, YTD, and since the market low. .Source: Center for Research in Security Prices (CRSP®), The

University of Chicago Booth School of Business; Jefferies

Updating our Target and Earnings Growth: We are pleasantly surprised at the strength of Small Active in Small off to very rought start so far

Caps so far this year. Given the RUT is trading >5% above our YE target of 2825, we raise our forecast this year

to 3190, a new high and 6.5% gain from current levels. A few thoughts: 60.0 Year to Date For Small-Cap Managers% Beating Alpha

50.0

40.0 Ahead of Fed hikes is not always a bad thing for Small Caps, as average rise has been 10% 39.4 30.0 26.8 24.7 30.6• 20.0

six-months prior to first boost. 10.0

-2.6 -2.8 -2.9 -3.2 New index will be about four multiple points cheaper than current index based on fwd P/E, but -10.00.0•

Core Growth Value All