Australian small caps are heading into the earnings season with considerable momentum this year, with the S&P/ASX Small Ordinaries Index enjoying a strong start to 2025, posting a 4.6 per cent return in January.

That’s largely been driven by lower-than-expected inflation figures increasing the likelihood of an interest rate cut in Australia. The prospect of three to four reductions by the end of 2025 will drive investors into the smaller end of the sharemarket. Monetary easing has historically been positive for smaller companies and there are several themes expected to emerge this reporting season.