Small companies in 2026: The benefits of exposure to a stronger US economy

Following an easing in global trade tensions, we believe the stronger US economy is providing opportunities for Australian small and mid-cap equity investors in 2026. US macro-economic factors could support earnings growth for Australian companies with quality US exposures.

A resurging US

When President Trump announced the “one, big, beautiful bill act” in April 2025 raising tariffs globally, Ausbil went into the ‘war room’ and implemented a risk management framework based on scenario analysis. Despite significant negativity in consensus, we saw a path of negotiated outcomes and a stronger US economy.

Since April, the data flow has validated our macro conclusions. Trade deals have locked in lower tariffs than first threatened. Our forecasts expect economic growth for the US in 2026 to be much stronger than our 2025 forecasted growth (Table 1), at 2.1%, with policy tailwinds including US tax cuts, investment incentives, lower oil prices, lower core inflation, tariff exemptions for key industries and steady monetary policy.

Table 1: Global growth accelerating into 2026

Beneficiaries of US foreign policy

The Trump administration’s America first focused policies have also reset global security and military relationships. An example of this is the Rare Earths/Critical Minerals Executive Order to realign rare earths supply chains away from China.

This provides a favourable backdrop for companies like Lynas Rare Earths(ASX: LYC), Iluka Resources (ASX: ILU), and other critical minerals like lithium and uranium, which may benefit in this area such as PLS Group (ASX: PLS), IGO (ASX: IGO) and NexGen Energy (ASX: NXG)

Beneficiaries of US housing

The positive structural growth outlook for the US is increasing cyclical demand for house building, remodelling and renovation following a period of significant challenge (Chart 1).

Chart 1: US renovation and improvement is set to rise

A number of Australian companies have built large businesses in the US housing construction and remodelling market, including Reece (ASX: REH) and Reliance Worldwide (ASX: RWC). In the building materials and plumbing sector, both REH and RWC, are expanding their businesses in the US.

A stronger consumer

Improvement in sentiment and spending during a cyclical upswing typically translates in improved earnings for the facilitators of commerce like banks, BNPL and digital transaction providers. Two such companies listed on the ASX but with major and growing businesses in the US are Zip Co (ASX: ZIP) and Bloc (ASX: XYZ), both which enjoy competitive point-of-sale (POS) presences in the US.

Another US beneficiary is News Corp (ASX: NWS), with the Dow Jones business and News Corp's significant stake in REA Group (61.4%). We also believe REA, is positioned to benefit in America, which has grown revenue by a Compound Annual Growth Rate (CAGR) of almost 17% over the last 15 years, defying periods of challenge, such as the COVID-19 pandemic and recent interest rate adjustments.

Secular technological change

The secular growth market in technology that started with the smartphone and app revolution before expanding into cloud and AI has seen the emergence of technology unicorns in the Australian market.

These include listed and unlisted names like Canva, Xero, Atlassian, WiseTech Global, Afterpay (now part of Block), Zip Co, Macquarie Telecom and Life360 to name a few.

Life360 (ASX: 360), a mobile application focused on family safety and communication, is one that has grown rapidly in Australia and the US, with +77mn monthly average users. 360 has a significant ramp of potential advertising revenue per user in their growing global business.

Chart 2: Life360 has significant revenue potential

A positive outlook

As a house, Ausbil is more positive on earnings growth than consensus for FY26. The market is expecting a solid earnings growth run for mid and small-cap equities. Table 2 outlines the current consensus outlook or earnings growth (EPSg) across each segment from 2026 to 2028.

Table 2: Consensus EPSg outlook

Mid-cap equities are showing EPSg of +14.0% for FY26, with small caps at +29.1%. FY27 and FY28 also look promising for compounding in earnings for small to mid-sized companies.

Ausbil’s view that the economy will see growth improving into 2026 for Australia, the US and the global economy (Table 1), together with increasing resolve on world trade, and fiscal stimulus and easing monetary policy in the US, will likely improve consumer and business spending, with cyclical uplift for equities.

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