1. Capital will flow back into US from the emerging markets as yield chasers will start returning.
2. The broader investor capital will likely be deployed in a wider variety of asset classes. So far this year, most of the market returns have come from a very narrow list of high growth/momentum stocks while value has been left behind. This situation will start correcting.
3. The possibility of reflation will make smaller companies more profitable. The businesses that have debt from the low interest rate times will enjoy 2 benefits: a) higher return on capital being used to pay back low interest rate debt, and b) a decline in the real value of the debt.
Since 2009, small cap value stocks have underperformed the broader stock market. This has been a long run of underperformance which is not in line with the historical record. Rising interest rate environment generally means the small caps and value stocks regain their performance edge and I expect this to happen starting December.
In summary, we are now entering a period when smaller company stocks and value stocks will be better performing asset classes for the next 5 - 10 years.