Small-Cap Financials Are Powering Ahead. The Charts Point to More.

Jonathan Steinberg, founder and chief executive officer of WisdomTree, speaks at the DC Blockchain Summit in Washington, D.C., in 2024. (Al Drago/Bloomberg)

Small-cap financial stocks are in the driver’s seat, poised to benefit as a weakening job market increases the odds that interest rates will be cut soon.

Smaller companies tend to benefit disproportionately from lower rates because the vast majority of them tend to rely on borrowed money to keep their businesses going. Financial stocks, meanwhile, gain because people borrow more when loans are more affordable.

A few stocks fall in both categories.

WisdomTree , the asset manager and ETF specialist, is powering through 2025 with a surge of more than 30%. Shares have advanced in 18 of the last 21 weeks, nearly doubling in price.

The chart below sports a bull-flag formation. A decisive push through the $14 level could ignite a measured move toward $18 by year end. Notably, WisdomTree has stubbornly held its ground since powering through a double bottom in May, a classic example of why adding to market leaders on strength can pay off in a sustained rally.

WisdomTree was trading at $13.29 Friday.

LendingTree , the financial services powerhouse, is lighting up 2025 with an impressive 84% rally thus far. The company, benefiting significantly from lower interest rates, just clocked a sixth gain in a seven-weeks run that began with a surge of 29% in the week ended July 25. The stock closed near the top of its weekly range in all six weeks.

This week, LendingTree is demonstrating excellent relative strength with a solid 7% advance, standing out as the Financial Select Sector ETF remains flat.

The one-year chart paints a compelling technical picture, showing robust follow-through after a breakout from a double-bottom base. On Thursday, the stock cleared a bull flag pivot at the round 70 level, setting the stage for a potential rally toward $95 in the first quarter of 2026.

LendingTree was trading at $72.27.

Ezcorp , a financial services specialist focusing on pawn loans, is up 38% year to date, while peer FirstCash Holdings has gained 43%. Both stocks tend to do well across economic cycles.

The daily chart below highlights solid technical action for Ezcorp. It shows a normal retracement to the stock’s 200-day simple moving average, followed by an Aug. 26 breakout above a cup-with-handle trigger at $16.44. This sets the stage for a potential move toward the very round $20 level by year-end. Patient investors stand to gain.

Ezcorp was trading at $16.72 Friday.

Write to Doug Busch at douglas.busch@barrons.com