Lower inflation has favored “Asset Light” over “Asset Heavy”. “Asset Light” small-caps have been sharply outperforming since Mar ‘25 up 53% versus 17% for the “Asset Heavy” grouping. That outperformance had been occurring since Jun ’22, when inflation peaked at 9.0%, but has really accelerated since the market’s post-Liberation Day low. “Asset Light” companies had traditionally struggled to post meaningful, if any lasting outperformance until 2016. But from 1Q16 through 4Q20, “asset light” small-caps outperformed “asset heavy” ones by 6800 bps (or 820 bps annualized) as yields trended lower, the Fed kept rates ultra-low and public venture capital was in vogue. From Dec ’20 to Jun ’22 “asset light” companies struggled, underperforming “asset heavy” companies by over 2100 bps as inflation began to ramp inducing increasing talk of Fed hikes fight inflation. “Asset Light” does not mean “low quality”.