Small caps have slumped, but Jefferies says these cheap stocks are primed for a comeback

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Small caps have faltered recently amid the rotation back to growth stocks, but Jefferies is banking on several smaller names to rebound.

The small-cap benchmark Russell 2000 is off by about 5% since hitting its peak in March after falling 4.2% just last week.

The flattening of the yield curve — which signals less optimism towards economic growth — has pushed investors out of cyclical names and back into growth stocks.

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