There could be some runway for small caps, says BTIG's Krinsky

Core Viewpoint - The small cap market is showing signs of a potential breakout, with the S&P 600 index nearing its all-time highs, indicating possible upside for small cap investments [2]. Small Cap Performance - The Russell 2000 index achieved new all-time highs in September, but the S&P 600, which includes a profitability component, struggled until recently [2]. - Small caps are currently at levels similar to those seen four years ago in November 2021, suggesting that if the recent breakout holds, there could be significant upside potential [2]. Market Dynamics - There is a noted relative weakness in some of the MAG 7 stocks, particularly Nvidia and Meta, which may impact overall market performance [3][6]. - The ratio of small caps to MAG 7 stocks is beginning to break out of a multi-year downtrend that started in 2022-2023, indicating a shift in market dynamics [3]. Future Outlook - Despite the relative underperformance of MAG 7 stocks, there is still potential for small caps to perform well as long as other market segments continue to participate positively [5]. - The current pullbacks in major stocks like Nvidia and Meta could signal a trend change, particularly for Meta, which is showing signs of weakness [6].