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Why the upside to small caps isn't so small: CIO

As the past two weeks of volatile trading sessions after fears of slowing global growth sparked a dive into correction territory, the small-cap-focused Russel 2000 has outperformed the S&P 500 by a near 2-to-1 margin.

And if the the American economy continues to recover, that trend isn't likely to end soon, according to David Pearl, co-CIO of Epoch Investment Partners.

"Small caps are inexpensive and because of the global slowdown we're experiencing they are more isolated and protected because the domestic economy in the U.S. is pretty good," he told CNBC's "Closing Bell" Wednesday in an interview.

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Consumer confidence numbers continue to improve as well, partially due to falling prices. The last read on the consumer price index was a rise of just 0.1 percent in July, and was still at the same level even after removing falling energy prices from the equation.

"The U.S. consumer has more purchasing power with oil and gasoline lower," Pearl said. Yet still, from the standpoint of domestic companies, many only expect that to become a tail wind if consumers switch from saving to spending that windfall. He, however, remains confident a bump in discretionary spending will follow.

"Consumers with wages that haven't grown a lot will still feel a little better because all their prices are down," he said.