Investors looking for opportunities in this elevated market may want to take a look at U.S. small caps, according to Nuveen’s Saira Malik. “There is still room for this rally to run, but we do need to be careful because of valuations,” the firm’s chief investment officer said at CNBC’s Delivering Alpha Conference on Wednesday. “That’s why we’re looking at areas that are cheap — small caps trading at that big discount. You need to be more selective.” Smalls caps have outperformed in the wake of president-elect Donald Trump’s victory over Vice President Kamala Harris. The Russell 2000 index surged on the heels of Trump’s win and is up nearly 8% since the start of November on optimism that lower tax rates will help smaller, domestically focused companies the most. The index is up about 17% this year, still trailing the S & P 500’s more than 25% year-to-date gain. Malik views small caps as one of the most attractive areas amid a broad rally that’s boosted the major indexes and valuations to new highs. The sector, however, appears to be trading at two-decade lows relative to large caps, she said. Nuveen in March of this year had about $1.2 trillion under management. A strong dollar and deregulation should also bode well for small cap stocks typically oriented in the U.S., she added. Potential tariffs from the new Trump administration and greater spending power among U.S. consumers is another boon for smaller companies. “Deregulation is going to make the world an interesting place, because it could open up more M & A activity, which, again, positive for small caps trading at that deep discount to their counterparts,” Malik said. The iShares Russell 2000 ETF (IWM) , which tracks the Russell 2000, is up 8% this month.